Segregated Witness and Bitcoin Exchange CEX.IO

Before explaining the SegWit concept, it’s worth to learn more about Bitcoin Exchanges, which might be affected.

CEX.IO is an online Bitcoin exchange which is based in London (United Kingdom) and operates worldwide. You are possibly asking, what is that? What’s the purpose of a Bitcoin exchange? Well the answer is quite simple: A Bitcoin exchange is an online business platform that allows Bitcoin owners to trade their Bitcoins for fiat money (CEX.IO allows to trade your Bitcoins for USD, EUR, GBP and RUB) and vice versa. CEX.IO furthermore lets you buy Bitcoins with credit card or by bank transfer, and sell them too.

It’s really that simple. You can purchase and sell Bitcoins, and you can likewise trade your coins for money, and then do whatever you please with it.

Why choose CEX.IO as your main Bitcoin exchange website?

Good question. As a Bitcoin owner/user, you obviously want the most reliable and safe website to trade your precious Bitcoins for money, without problems or encumbrances. With that in mind, I recommend using CEX.IO as your main Bitcoin exchange website.

Right now you’re thinking, “There are so many Bitcoin exchanges, I need good arguments to choose which one I will use”. And without wasting more time, I will list what I think are the main benefits that CEX.IO offers to its users:

• There are many payment options to choose from. You can choose Visa, MasterCard, bank transfer (SWIFT, SEPA). These various payment options are very practical, as they were made thinking in all Bitcoin owners, so that anyone can choose their favorite/main payment method.

• It has a very strong security. It has protection against DDoS attacks (a distributed denial of service attack), it has full data encryption and CEX.IO is compliant with PCI DSS standards. I find this possibly the most important benefit of all. We are dealing with our money, and we want protection and feel safe when trading/buying/selling our Bitcoins.

• World Coverage. CEX.IO provides services all across the globe (including 24 states of the USA). So wherever you are, you can most probably use CEX.IO there.

• Legal compliance. CEX.IO is registered in the UK, has the MSB status in FinCEN (Financial Crimes Enforcement Network), and has strong relations with banks. CEX.IO is clearly a reliable and trustworthy online exchange, showing its licenses to prove it.

Using CEX.IO has very clear advantages, but the ones I mentioned previously are only what I think are the main ones (you can find all of them in CEX.IO homepage). There is also another reason you should use this online exchange. Soon the entire cryptocurrency industry and of course, CEX.IO, will begin to use the SegWit (Segregated Witness) protocol. I will explain below exactly what SegWit is.

The SegWit Concept

What is “SegWit”?

Let’s start from the beginning. SegWit is an abbreviation for “Segregated Witness”, and was created by Dr. Pieter Wuille. Now, what exactly is the purpose of SegWit? How does it work?

How does it work?

I will try to explain how SegWit works the best as possible. First of all, I’ll explain what a Bitcoin block is. Blocks are where data relating to Bitcoin are permanently recorded. Like a page of a journal. And each time a block is “completed”, it gives its place to the next block in the blockchain…

And what is a blockchain? To put it simple, a blockchain is a sort of “journal” of all the Bitcoin transactions that have ever been performed, and it is continually growing by adding new blocks in a chronological order.

Now that the basics are covered, what is SegWit? SegWit is a procedure by which a blockchain increases its limits removing signature data from transactions. This naturally frees up more space, therefore managing to add more transactions to the chain.

Why was SegWit created? It has a very simple explanation really. The more transactions are made, the more blocks the chain has to receive. Since blocks are created only every 10 minutes and are forced to one megabyte maximum, only a specific number of transactions can be added to that block. This is causing problems with transactions, taking hours to validate them.

How will SegWit benefit the Bitcoin owners?

Now that you know how the SegWit protocol works (when it’s about money, it’s always good to know how everything works), I’m going to explain what matters to the Bitcoin users: SegWit’s benefits.

The most obvious benefits are the application of malleability fixes, and giving a boost to the number of transactions which can be included in a block; this will finally fix the scalability issues (one of the greatest issues Bitcoin ever had), as the blocks won’t be limited to one megabyte in size anymore. Blocks were always automatically rejected if they were larger than one megabyte. This won’t happen anymore, and it is one of the greatest Bitcoin upgrades to date.

These are the main and greatest benefits SegWit will bring us. However, you can find a whole list of minor benefits SegWit has too.

SegWit and CEX.IO

SegWit activation is very important not only for any Bitcoin owner, but also for CEX.IO users too. As you probably already know the majority of hash power signalled support for BIP91, one of the proposals encouraging SegWit implementation. There is a good chance that the BIP91 lock-in will eventually lead to smooth SegWit activation, thereby solving Bitcoin’s scalability issues (like I explained previously in this article).
Even though the community appears to be upbeat about Bitcoin prospects now, there is still a slight chance of hard fork and, therefore, split taking place in the near or distant future.

Sounds confusing? It really isn’t. If the split eventually happens at some point in the future, there will be two Bitcoin blockchains and the user, who owned original Bitcoins, will have those coins in both chains.

CEX.IO users have no need to be alarmed though. CEX.IO cares about its customers, and has been preparing for both scenarios. It will support any of the forks ultimately chosen, and offer coin-splitting services to its users (another quality proof of CEX.IO).
It’s not a problem if the user doesn’t know how to split his coins. CEX.IO has got his back covered. It will allocate the coins appropriately.

You can find all of what I mentioned above and more in the CEX’s blog article.

I just wanted to conclude this article saying that this new SegWit protocol is truly innovative and will change the whole Bitcoin world, solving efficiently a major issue that has been “plaguing” the Bitcoin users: The scalability issue.

Also, follow CEX.IO, one of the major and most reliable Bitcoin exchange websites, to get the latest news about SegWit on its blog.