The story of Bitcoin Improvement Proposal 91 (BIP 91) provides a lot of insight into how miners decide to change the blockchain. However, understanding the nuances of BIP 91—and eventually SegWit2x—can take some time since it’s a complicated history.
BIP 91 and BIP 148 defined
BIP 91 is a piece of code that makes it easier for the blockchain network to adopt Segregated Witness (SegWit). This is an upgrade that aims to fix transaction malleability. This Bitcoin Improvement Proposal would overrule BIP 148, which is a proposal that posed a risk of causing the Bitcoin network to split—more about this later on.
If the Bitcoin network were to split, it would create two separate chains with two different coins. BIP 91 aimed to prevent this split from ever happening. Its goal is to make BIP 148 and SegWit2x compatible with one another.
BIP 148, on the other hand, proposes a user-activated soft fork (UASF) that would push miners to adopt a new form of SegWit. If BIP 148 was activated over BIP 91, blocks found by miners who do not adopt the new form of Segwit would be rejected by BIP 148-compatible nodes.
What is Segregated Witness (SegWit)?
Segregated Witness or SegWit is an add-on to the Bitcoin code that carries signatures and extra data. The data that the nodes carry is not hashed along with other parts of the transaction into its ID, which means that both new and old nodes will consider all transactions that contain signatures in the Segregated Witness as valid.
Essentially, the SegWit add-on removes signature-related data from Bitcoin transactions. Removing the data related to the signatures from each block makes blocks smaller in size, allowing for more transactions to fit within a single block. As a result, more transactions can be fit into the blockchain and the smaller blocks offer a solution to the scalability issues of the blockchain.
SegWit2X in a nutshell
SegWit2x, on the other hand, was a hard fork proposal that was aimed to improve the transaction processes by increasing the size of blocks on the blockchain. It was meant to be implemented towards the end of 2017, but it was never adopted by enough miners. In fact, the possibility of adopting Segwit2X caused a great deal of friction within the mining community. Most of the community did not want the SegWit2x hard split because of uncertainties and the possibility of making the price of Bitcoin even more volatile.
BIP 91 is the code that is currently activated, meaning the network will only accept SegWit signaling blocks—effectively making SegWit2x is a thing of the past.
What was the point of BIP 91 and SegWit?
Previous to BIP 91 and Segwit, there was a noticeable delay with transaction confirmations. SegWit was meant to be a fix for that. As Bitcoin was becoming more widely used, the network couldn’t handle its 1MB block size limit. The new update increased the block size to 2MB, which resulted in faster transactions and lower fees for users.
Why did this cause so much fuss?
Because blockchain is a decentralized ledger, it needs all of the miners to accept the changes and come to a consensus. The rules that are used by the vast majority of the miners are compatible, but if a transaction was both accepted and rejected by different nodes, the block would be considered invalid. This could cause verification and processing issues.
Because of these potential issues, it is vital that the network reaches a consensus to make sure everyone is adhering to the same blockchain rules. In the case of BIP 91, 90% of the total miners hashing power signaled “bit 4” to show their support to proceed with SegWit. With 90% of miners in agreement with BIP 91, there was no need for a hard split.
Where does Paxful stand?
In 2017, we received a lot of questions asking if we would support two different coins on the platform and which fork we would support. Paxful supported the original developers’ Bitcoin scaling approach because it was extensively researched and tested. Because Paxful is using BitGo multi-signature wallet infrastructure to handle hot wallet and Bitcoin deposits, no BTC would be lost in the event of a hard fork.
With BIP 91 being activated years ago, Paxful is now fully integrated with SegWit and, with this change, we anticipated that transactions would become faster and more efficient.
As for what the next big controversy in Bitcoin will be, we’ll probably have to wait and see. Let us know what you think of BIP 91 in the comments section below!