At a time when blockchain upgrades have been defined by years of intellectual struggles, a new milestone is being set that contrasts starkly with this narrative.
Barring any unexpected issues, a highly anticipated code change will hit the Litecoin public blockchain today. With the introduction of Segregated Witness (SegWit), Litecoin, the fourth largest cryptocurrency by market capitalization, should, among other things, increase the capacity of the currently limited transaction throughput.
Adding impact to the messages is the context in which this upgrade occurs.
SegWit has been at the center of the Bitcoin scaling debate since it was first proposed in late 2015. On this network, miners were reluctant to support the change for technical and political reasons, and as such, users urged that users test the technology on Litecoin to see if any concerns were warranted.
With SegWit potentially paving the way for technologies that expand the value proposition of cryptocurrencies, the move to adopt the upgrade has rekindled the excitement about the normally less popular cryptocurrency. As a result, Litecoin’s price has almost tripled since the end of March.
But what’s the big deal? Why are some in the church so excited about the change?
Franklyn Richards, director of the Litecoin Foundation, argued that the upgrade could pave the way for other technologies that can be tested on a live platform, such as the long-proposed Lightning Network and sidechains – an assessment made by the F2Pool’s operator Mining Pools Wang Chun confirmed upon contacting CoinDesk.
And strangely enough, some see it as a way to drive the Bitcoin scaling debate forward, even if it’s not clear how exactly it could be done.
Since the rules are coded in Litecoin, the change will be blocked if 75% of the blocks contain a snippet of code flagging support for SegWit over a two week period.
If at some given point (block 1193472) 75% are still flagging support, the code change is activated, making SegWit a permanent part of the Litecoin network.
At press time, that decision was approximately 600 blocks away.
After that, it will take about two weeks for the change to be officially activated to give wallets and users ample time to apply the change. This process was originally described in BIP 9, a specification that outlines the currently preferred method of changing Bitcoin at the consensus level.
In addition, it is a backwards compatible change so that Litecoin services do not need to be updated to support the transactions if they do not want to. And perhaps in part because Litecoin’s transaction volume is still low, wallets don’t seem in a rush to do so.
“LiteVault may support the creation of SegWit addresses in the future if there is demand for them. At this point, LiteVault will be updated to be issued from these SegWit addresses, ”said a spokesman for the popular Litecoin wallet.
He added that as far as he knows, wallets do not currently support SegWit-style transactions.
Lightning Network too?
The bigger consequences of the change are somewhat longer term.
For one, it is likely that an operational version of the Lightning network will also be deployed on litecoin, which means that another scaling solution originally developed for Bitcoin may see live testing on the smaller network.
Charlie Lee, the inventor of Litecoin, said he was working with Lightning Labs on the possibility.
Meanwhile, another Lightning Network startup, ACINQ, recently tested its version of the top-layer network on Litecoin. Since the cryptocurrency is very similar to Bitcoin on a technical level, it works almost “out of the box”.
These types of developments could breathe new life into the cryptocurrency, as Litecoin, although it has been one of the five largest cryptocurrencies for some time, has been anything but a sterile field of innovation for some time. (F2pools Chun, for example, even went so far as to joke that litecoin has no developers.)
Currently, based on a consensus among miners, it seems unlikely that slides would be added to the plan at the last minute. Even mining companies that strongly oppose SegWit for Bitcoin (ViaBTC and Bitmain) have announced that they will continue to support the plan.
Richards of the Litecoin Foundation argued that Litecoin users “unanimously” supported the code change and that the “policy really only exists on Bitcoin”, stating:
“If there was any doubt that this is what users want, it has been thoroughly stamped out as even anti-SegWit pools are being updated to support SegWit under the pressure.”
However, SegWit was designed to expand the volume of transactions, and while this currently seems necessary for Bitcoin (as the blocks fill up), ironically, it is not exactly required for Litecoin. At the time of going to press, the cryptocurrency has about a fifth of the transaction volume observed with Bitcoin.
Do we really need to increase the transaction capacity? Some, including Charlie Lee, have referred to it as more of a step towards SegWit adoption on Bitcoin.
For example, Jack Liao, CEO of Litecoin mining hardware developer LightningAsic, admitted to CoinDesk that he expects the upgrade to mean “nothing” for the Litecoin economy.
“But it can get the Bitcoin community into active SegWit as soon as possible,” he said.
Henry Brade, CEO of investment platform Prasos, added that this may be the first time another altcoin has acted as a tech test bed for bitcoin changes.
He also suggested that if SegWit proves safe, it will put more pressure on the Bitcoin mining pools to adopt the change.
“At least a lot of people hope it will. The whole subject is very frustrating. “
Litecoin image via Shutterstock