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Where the staggering price highs of 2017 have incorporated "hodl" into public consciousness, 2018 was the year that "buidl" became a trend in the crypto-industry – and Bitcoin was no exception.
Expected in Bitcoin Magazine & # 39; s First hedging story of 2018, Bitcoin's technological progress was only accelerated in 2018. By improving Bitcoin from all over the world, developers and entrepreneurs have promoted the adoption of Segregated Witness, launched the Lightning network, released solutions for privacy , made sidechain and made progress on a solution by Schnorr signature – all this was still behind the corner just a year ago.
Following the January cover story, the 2018 double-decker cover explores how these five technologies have progressed.
In the first part: Segregated Witness and Lightning Network.
Segregated Witness
The Segregated Witness (SegWit) soft fork activated in August 2017 was probably the biggest Bitcoin protocol update to date. By resolving the long-standing malleability bug, it was better to enable the second-level protocols by replacing the Bitcoin block size limit with a block weight limit. Transactions that use SegWit are partially stored in a new part of Bitcoin blocks, allowing the network to process more than one megabyte of transaction data every 10 minutes.
As early as 2017, the adoption of SegWit had a rather slow start. By the end of the year, most portfolios had not yet integrated the update and there were not even many exchanges or other Bitcoin service providers. At the start of this year, less than 15 percent of transactions used additional block space and barely blocked 1.1 megabytes.
Throughout 2018, however, adoption has increased a lot, as more and more portfolio and services have implemented SegWit. This perhaps includes in particular the Bitcoin Core portfolio, which allowed transactions with SegWit with its version 0.16.0 in March. Other popular portfolios, such as Coinomi (March), Bither (September) and BRD (November) followed the example, while Mycelium should implement the film before the end of the year. Some of the largest Bitcoin service providers have also implemented Segregated Witness in 2018, including Coinbase (February), Bitfinex (February) and Xapo (could).
As a general result, SegWit usage statistics have increased well over 40% over the course of the year. However, while it is a three-fold increase, this is lower than some would have expected it to be now.
"I would say that the main reason why the use of SegWit is not well over 50 percent is inertia," Coinmetrics data analyst Antoine Le Calvez speculated when asked Bitcoin Magazine. "If you had not adopted it when the taxes exploded last year – due to lack of time or other priorities – I do not think you will support it until the commissions fail to explode again, when the SegWit transactions will have a clear advantage in terms of costs compared to non -Swwit transactions. "
In addition to SegWit, the new address format bech32 also saw its first non-trivial adoption in 2018. These addresses, starting with "bc1" instead of 1 or 3, are a natural choice for SegWit. Transactions from these addresses require less data to be included in a block and are therefore even less expensive. Several portfolios – such as Coinomi, Electrum and Wasabi – have gone directly into this new format.
He also did the popular BRD portfolio for iOS and Android and, in September, he even launched a campaign for a further adoption of bech32: "When SegWit?"
"We always took the attitude that bech32 represented the best chance of being the gold standard for the SegWit implementation," said CSO Aaron Lasher of BRD, explaining the idea behind initiative of Bitcoin Magazine. "The backward compatibility of P2W-enabled SegWit has given the industry a very necessary start, but to really drive adoption, the raw SegWit is the way to go."
He continued:
"As one of the largest portfolios, we enjoy an element of influence on the state of the network, since a non-trivial percentage of bitcoin transactions is conducted through the BRD portfolios, obtaining portfolios and other service providers to update their software to interact with addresses of bech32 is the goal in general, and with this initiative we are targeting them in a respectful and persuasive way. "
Perhaps thanks to the campaign, in part, and in addition to the adoption of SegWit itself, the use of bech32 also increased in 2018.
"5.6 percent of the releases created these days are outputs bech32," said Le Calvez, "although the bech32 outputs only store ~ 0.8 percent of all bitcoins, so it means that bech32 users are pretty active. it could be due to the fact that Coinbase and LocalBitcoin support it and the exchanges attract arbitrageurs who transfer money faster.Other reason could be that, bech32 is the cheapest way to carry out transactions, it attracts high-activity users. "
All in all, the Bitcoin blocks have grown together with the adoption of SegWit in the last year. While average numbers are not as significant (because not all blocks are filled first), the typical full block today is about 1.3 megabytes. The biggest Bitcoin block to date has been extracted this year, in October from ViaBTC, and it was just over 2.3 megabytes.
The network of lightning
Long awaited for years, 2018 was the year in which the Lightning Network made its "official" debut. Although the risky nature of early stage technology was transmitted through the #reckless hashtag, regular users have been invited to try out the Bitcoin overlay network for fast and cheap transactions for the first time.
In March, Lightning Labs was the first to announce the beta version of Ind, the software implementation is the cutting edge, and has collected a $ 2.5 million investment round to be launched. This was followed by the beta version of ACINQ's ecilir later same month and the Blockstream c-lightning in June. From September, Casa even allows you to host a Lightning physical node in your home: the Home Node. Concurrently, several Lightning portfolios have been made available, and others come, including some from established Bitcoin portfolio providers such as Trezor and Electrum.
Probably at least as important, Lightning payments are increasingly accepted for real goods and services.
One of the first users of Lightning Network was a Bitrefill prepaid top-up service in March of this year. Chief executive Sergej Kotliar closely followed the use of Lightning Network, recounting Bitcoin Magazine:
"At this point we have processed 2,170 Lightning orders, receiving a total of 6.3 bitcoins.The share of Lightning payments is constantly growing and currently amounts to about 2.5 percent of our bitcoin orders.We are generally waiting two things for to take off in this way: more portfolios and integration of the exchange ".
Distribution of payments to Bitrefill by payment method. (Number of payments, not amounts.) Source: Bitrefill
Although it was not very necessary this year, as the fees on Bitcoins were negligible for most of 2018, Kotliar also monitored the number of chain transactions avoided using the Lightning network.
"Basically, I added all the channels, open and closed, and how many payments and submissions were made, as a sort of measure of downsizing efficiency," he explained. "This entails up to 2.75 payments per transaction on-chain and 3.46 payments per transaction on-chain, if we include forwarded Lightning transactions.This number has grown steadily over the last two months thanks to the reliability of the channel and to the growth of the network ".
In addition to Bitrefill, other adopting pioneers have included the Blockstream store (since then January) and payment service of Living Room of Satoshi bills (from April). Payment processor BTCPay has integrated Lightning in payments July, offering it to all its users (like TorGuard VPN and Coincards). This was the payment provider CoinGate in September, on the Bitcoin ATM network of Lamassu, the Bitgild bullion store and hundreds of other traders. And the first exchange began to accept the Lightning payments for deposits in 2018: the gold-bitcoin Vaultoro exchange (from May).
Equally impressive was the level of community involvement in this new technology. The Fulvio, a startup based in Berlin, for example, has organized a series of famous "Hackdays": three in the German capital and one in New York. Developers and anyone else with interest could come to know the technology and build it on the spot. Also in New York, the Bitcoin development company Chaincode Labs has also focused its third "Bitcoin Residency" program on the Lightning network.
As a completely new phenomenon, and partly the result of these events, numerous Lightning apps ("Lapps") have been introduced over the course of the year.
"Lightning has allowed people to create lots of interesting things with bitcoins and is unlocking a whole new potential, things we have not even thought about today," said Elizabeth Stark, CEO of Lightning Labs. Bitcoin Magazine. "Every day we wake up and someone has built something new".
Stark & # 39; s Lightning Labs has been trying to keep track of the Lapps available in its Lightning app directory. Examples include a jukebox, a rollover solution and a file hosting solution, all powered by the Blockstream Lightning Charge microperied system, presented during the company's "Week of Lapps" in March. Another particularly useful Lapp launched this year is Submarine Swaps, which allows users to pay Lightning invoices even without having a Lightning wallet. In addition, hackdays have produced photocopiers, payment processors for outlets and games. And the Lightning Network also saw the emergence of what may be considered its first "killer app": the web graffiti platform inspired by the million dollar homepage satoshis.place became viral through the Bitcoin social media la last summer.
All this activity is also translated into data. Although publicly available Lightning network statistics are not completely reliable – some aspects of the network are difficult or impossible to measure – various Lightning Network explorers show that there are several thousand Lightning nodes online in any day. Among them, they have opened more than 10 thousand payment channels, with hundreds of bitcoins worth almost two million dollars, and all of this is growing rapidly.
Meanwhile, the code that supports the Lightning network is only getting better and many parts of the protocol have been redesigned. In November, a group of Lightning developers of different implementations met for a second Lightning Summit in Adelaide, Australia – after the first in Milan in 2016. Here, the specification "BOLT" Lightning Network jumped forward, opening the road to more innovation for 2019 and beyond.
"The second Lightning Summit reaffirmed that this is an open community interested in moving forward a common vision of an open network," said Christian Decker, developer of Blockstream and c-lightning. "Puts all the things we have postponed to the first meeting on the table and opens a second exploratory phase for all the nice features, for example, splicing and multipath routing allows us to hide all the details about channel allocation : the user sees only a single balance available both off and on-chain. "
In the second part of this article, which will be published in two weeks: privacy, sidechains and Schnorr.
This article has been updated.
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