According to statistical data available online, Segwit-based BTC transactions witnessed a steady growth of around 35%-40% between August 2017-18. However, over the course of the past 5-6 months, the adoption of this technology seems to have tapered of by a whopping 50% (which is not a good sign to say the least).

For those of our readers who may not be aware, Segwit is a soft-fork protocol upgrade that was designed to increase the block capacity of the BTC network (as well as to rectify all of its existing malleability issues). From a technical standpoint, we can see that Segwit transactions employ the use ‘novel signatures’ and ‘redeem scripts’ which do not count towards a block size limit of 1MB.

In addition to all of the information that has been presented above, it is also worth noting that Segwit transactions are around 25% smaller in size when compared to legacy transactions.

As a result of this, Bitcoin’s native block size does not have to be altered even though its intrinsic capacity is increased quite substantially.

While no clear reason can be attributed to this drop in adoption, many analysts believe that cost cutting measures implemented by many firms (due to the current bear market) could have played a part in the dropping number of Segwit TXs.

To be even more specific, we can that Segwit’s native mempool has been quite empty since the start of February 2018 and that its median fee rate has remained around the $0.20 mark since the beginning of last year. In this regard, it is worth pointing out that the aforementioned fee rates are so low because the demand for sending bitcoin has reduced and that many firms have implemented cost optimization measures such as batching (in recent times).

As many of our readers may already know, Segwit’s biggest advantage is that it helps in the reduction of native BTC transaction fees. However, since the associated tx costs with crypto assets are already quite low, many users have not really found the need to upgrade their wallets to Segwit.

For example, many big name players such as Binance have yet to implement Segwit (despite the firm accounting for a massive chunk of the daily global BTC trade volume). Similarly, even BitMEX, Gemini, and Bittrex do not currently support Segwit.

As mentioned earlier, many large businesses feel that a relatively small decrease in transaction fees does not truly justify the monetary costs required to upgrade their existing wallets to Segwit. Not only that, migrating legacy addresses to Segwit is quite an intricate process that can not only be quite technically challenging but also very time consuming.

If that wasn't enough, it should also be pointed out that there are currently many exchanges that support Segwit but are still charging users higher tx fees than those being offered by Binance.

Last but not least, a spokesperson for Gemini recently went on record to state that the exchange will soon be providing support for “Segwit, Transaction Batching and Bech32 addresses” by the end of Q1, 2019.

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