Coinbase to Integrate SegWit: What It Means for You

Coinbase customers may see some changes to their cryptocurrency wallets and transactions in the weeks to come. The largest cryptocurrency brokerage and exchange in the world announced this week that it would officially complete the process of integrating Segregated Witness (SegWit) by the end of February.

According to a report by Coin Journal, this is the final step in a process initiated in December 2017, when Coinbase vice president and general manager Dan Romero indicated to investors and users that the exchange would adopt the scaling solution protocol sometime in 2018. The question for many Coinbase users, though, is how this will impact their transactions and cryptocurrency holdings.

Faster Transactions, Lower Fees

The implementation of the SegWit protocol, an oft-debated measure introduced as a means of scaling bitcoin to meet increased demand, is expected to decrease congestion in the cryptocurrency's network. The result is that transaction times could be faster, and users may see a substantial reduction in transaction fees as well.

At this point, the bitcoin blockchain is able to process about 237,000 transactions per day, with fees below $0.1. This could be a result of the recent slump in bitcoin prices, which has been linked with a halving of bitcoin transaction volume since January.

Proponents of SegWit believe that it will help to scale bitcoin even in periods when the price of the cryptocurrency is thriving and transaction volume is significantly up. (See also: SegWit (Segregated Witness).)

(Infographic: PricewaterhouseCoopers)

Implementation Considerations

Dan Romero said Coinbase has considered the implications of adopting SegWit very carefully. Coinbase has already been criticized for its failure to integrate SegWit. "In terms of our engineering priorities, securely storing customer funds remains our top priority. Our next priority is to ensure that our platform remains performant during periods of peak volume," Romero said.

Coinbase remains one of the few major cryptocurrency exchanges to not yet suffer a significant hack. (See also: Coinbase: What Is It and How Do You Use It?) The adoption of SegWit will be a massive undertaking for the company, as the platform is much larger than most other digital currency exchanges.

Coinbase has millions of users active each month, and it accounts for a significant portion of all bitcoin trading. Thus, the impact of its decision to adopt SegWit could have repercussions on the entire cryptocurrency space.

Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns cryptocurrencies.