Despite the fact that cryptocurrencies are still relatively new, there have been many terms and words developed over the course of the last several years that have helped to develop jargon for this field. With all of those words, terms, and technologies, it can be difficult for those who are new to Bitcoin to keep up.
However, if you are serious about investing in Bitcoin or mining cryptocurrencies, it is a good idea to learn as much as possible, particularly about some of the new technologies that are being developed and implemented. Segwit and Lightning Network are two of these technologies, and they are geared toward improving the transactions on the Bitcoin network.
Technology to Help With Transactions
Currently, due to the fact that the block size will determine the maximum transaction capacity on the network, the transactions tend to be slow. There are limits to how fast the transactions can occur, so when the number of payments exceeds the capacity, they are added to a later block. This means that it can take half an hour to an hour or more in order for a transaction to go through fully, and to be trusted and accepted on the other end.
The slow transaction times are one of the only real drawbacks of Bitcoin when compared with other types of currency. For example, if you were to pay with cash or with a credit card, the transaction is going to go through instantly or nearly instantly in the vast majority of cases. That just is not true with Bitcoin in its current state. Transactions can be processed more quickly on the network, but in order for that to happen, the person making the transaction would need to pay a higher transaction fee. This fee is going to increase as more and more people are making payments through the network.
Let’s look at two technologies that are geared toward helping to solve this problem.
Segwit stands for Segregated Witness. The central idea behind their technology is to increase the Bitcoin network’s capacity by changing the location of the transaction signature from the start of the transaction to the end of the transaction. Those behind Segwit also believe they should weigh the transactions differently when compared to other data against the size limit.
While the main goal of the technology is to improve the way that transactions work when it comes to Bitcoin, you will find that there is another benefit to it as well. This system provides some security improvements to the Bitcoin blockchain, that are very welcome.
This technology wants to take a different approach to improving the transactions on the Bitcoin network. They want to utilize smart contracts as a means to create payment channels. They will then sync with the blockchain after a certain amount of time, so multiple payments can be processed, and then all of those can be added to one blockchain transaction.
While this has some great benefits, namely that it would be even faster than Segwit, and that it can reduce the congestion on the Bitcoin network, there are some issues, as well. The way the technology works causes concerns over security. So, even though it might be faster than Segwit, it is not as secure.
Both of these technologies are relatively new, and there are only a few providers offering them as part of their service. In fact, with Lightning Network, only TorGuard is accepting transactions. Some of the providers accepting Segwit include wallets like Edge and Electrum and exchanges such as Kraken and Shapeshift.