SegWit in the Wild: 4 Lessons Bitcoin Can Learn from Litecoin

Bitcoin reached a crucial technical and political milestone this week, locking in the long-debated code change Segregated Witness (SegWit).

The milestone, advocates hope, will provide a much-needed transaction capacity boost and – longer-term – open doors for more impactful scaling technologies.

But the idea saw its fair share of contention on its way to lock-in. While it aroused grassroots support from users who arguably helped push it through, it also attracted critics who were serious enough to split from bitcoin and form a new cryptocurrency that excluded it completely.

So, what will happen when the code change goes live? We're not without examples of what we can expect.

After some contentious back-and-forth between miners and users, litecoin, the fourth largest public blockchain network, was able to push through SegWit three months ago. As such, many believe litecoin, a fork of bitcoin's code, can act as a test platform for SegWit, providing real-world insight into adoption hurdles.

Here's what those close to the project have to say about the results:

1. SegWit is working (so far)

Arguably the most important takeaway is that SegWit hasn't led to any problems on the litecoin network itself – as of mid-June, the Litecoin Foundation reported there have been "no issues."

This is notable given the amount of controversy the change has created within the bitcoin ecosystem.

Some critics argued SegWit was too complexhttp://zander.github.io/posts/Who%20Wants%20SegWit/ and put the network at risk. For instance, it was suggested that if SegWit was activated (and certain other changes were made to bitcoin in the future), miners would be able to steal the coins from certain types of addresses.

The claim was put to the test on the litecoin network, though, with one user creating a $1 million-worth of litecoin "bounty" using a SegWit address. Attached was also a note that read, "Let's see if segwit really is ‘anyone-can-spend’ or not."

So far, no one has claimed the litecoin in the contract.

2. SegWit transactions are growing

Litecoin Foundation directors Xinxi Wang and Franklyn Richards have both admitted there haven't been many SegWit transactions across the network to date.

Although, the directors' sentiments are without precise measurements.

University of Freiburg computer science researcher Jochen Hoenicke explained the measurement challenges in this way – while you can label a transaction a SegWit transaction if it's sent "from" a SegWit-enabled wallet, you can't if the transaction is only sent "to" a SegWit-enabled wallet.

Put another way, transactions sent to SegWit-enabled wallets look identical to another complex transaction type, meaning they can't be monitored.

As such, Heonicke has compiled a list of litecoin SegWit transactions sent from wallets that support the new transaction type. According to his data, roughly 100 out of 10,000 total transactions per day are SegWit transactions.

3. Businesses are accommodating the change

And while Heonicke recognizes the list is incomplete because of the discrepancy in how transactions can be measured, he's noticed one trend.

"The number is increasing as support rises," he said, pointing to hardware wallet Trezor's announcement on June 7 that it was adding SegWit as its default transaction type. After that, he said, there was a noticeable jump (from nearly zero to double digits) in the number of litecoin SegWit transactions happening per day.

And as litecoin wallets and exchanges take the steps to support the code change, more SegWit transactions are likely to follow. According to Richards, other wallets, such as LoafWallet, are making progress on a SegWit upgrade.

In contrast, many bitcoin wallets already support SegWit, as they've been anticipating the change for over a year, so it's likely bitcoin will see more use of the feature.

Richards also argued there are important differences between litecoin and bitcoin that make SegWit less crucial for its operation. Namely litecoin doesn’t have the same high transaction volume.

"The scaling part of SegWit was predominantly for bitcoin to try and alleviate its network congestion, something that litecoin does not suffer from," Richards told CoinDesk.

Litecoin companies then don’t feel the same urgency to update their software to support the change.

"But I foresee that SegWit will probably be used extensively on bitcoin immediately after activation," Wang remarked.

4. Some wallets and users had trouble

Adoption metrics aside, Hoenicke pointed to some other "minor" technical issues.

Because of a bug in the mobile litecoin wallet Electrum-LTC, old versions of the software would "break" when users sent a SegWit transaction to the wallets.

Hoenicke noted another problem that, while specific to litecoin, highlights user confusion when things are changed around. Since litecoin is in the process of phasing in a new address type, some users needed to convert between the two types.

"Some accidentally sent bitcoins to their litecoin SegWit address after using the conversion tool and now have to wait for SegWit to activate on bitcoin," Hoenicke said.

While these are problems facing specific businesses and users, bad user experiences could cause discontent in the bitcoin community, especially since there's already been a long struggle over the change.

Bitcoin and litecoin image via Shutterstock