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This post is a companion to the earlier post on Segregated Witness Benefitsgiving an overview of the technical costs and risks that may be incurred by activating segregated witness via BIP For the purpose of this post, we will use costs to describe negative results that are certain to occur if segwit is deployed and activated, and risks to describe negative impacts that may not happen, or changes that not everyone may consider negative.
When analysing risks, we consider steps undertaken to avoid the risk that is, to minimise the chance of it occurringand steps undertaken to mitigate the risk that is, if it does occur, how the negative impact can be minimised. This post does not attempt to produce a conclusion as to whether the benefits outweigh the costs or whether segwit should be deployed or activated, but rather to assist by providing background information to assist stakeholders in making informed decisions.
A witness commitment is included in the coinbase transaction, adding between 38 and 47 bytes, or about 0. See BIP - commitment structure. This adds an overhead of 2 bytes per transaction to allow the serialisation formats to be easily distinguished, and an overhead of 1 byte per input for the count of witness items for each input. The segwit checksig bitcoin miner formats see BIP - witness program have the following impact when serialised:.
The checksig bitcoin miner above are based on a transaction of bytes with one input and one output. The motivation behind the first factor is discussed under Increased security for multisig via pay-to-script-hash P2SH. This should naturally limit the impact of this overhead in the long term.
It is possible to make most of this overhead disappear via changes to the network and storage serialisation formats: With segwit, additional checksig bitcoin miner is introduced when validating a block checksig bitcoin miner order both to check the witness merkle tree, and to deal with P2SH-encoded witness transactions.
The segwit patch set is a major change to Bitcoin, and was rolled out, though not activated on the main Bitcoin network, in Bitcoin Core 0. Any major checksig bitcoin miner like this runs a variety of risks, including:. For example PR In order to reduce the chances of these risks occurring when segwit is activated, the following steps have been undertaken:. The segwit patch also includes an additional 3, lines of added or modified code in the unit and integration tests that help ensure segwit is functioning as expected on every full build of the Bitcoin Core program.
A major factor in mitigating the impact of any bugs is that segwit is implemented as a soft-fork. Users of Bitcoin can simply avoid newly introduced features until they are personally confident they are implemented correctly, without losing any functionality.
The concept of technical debt is that an checksig bitcoin miner fix now might cause enough difficulty and problems in the long term, that spending more time and effort now will turn out to be more economical.
As noted above, the segwit code has been heavily reviewed, which helps resist the introduction of technical debt at both a code and design level. Also as noted above, segwit has multiple independent reimplementations, which helps discover any unnecessary complexity and technical debt at the point that it can still be avoided.
In support of existing efforts to pay down technical debt by refactoring and improving the Bitcoin codebase, segwit was merged as a code-only update as part of work towards the 0. Bitcoin already suffers from some significant design debt, and segwit is specifically designed to reduce the impact of some of this debt notably transaction malleability, linear scaling of signature hashing, and signing of input values. Disabling those features would render those transactions unspendable, effectively stealing funds from users.
A soft-fork is any change to Bitcoin consensus rules that invalidates some checksig bitcoin miner of previously valid transaction. The primary potential failure modes include:. Numerous soft-forks have already been activated in Bitcoin including BIPs 1634656668, andand this checksig bitcoin miner has been codified in the BIP9 process for activating soft-forks.
The BIP9 process was checksig bitcoin miner for deploying the CSV soft-fork BIPs 68,andand resulted in a fast and unproblematic upgrade to the consensus rules for that change.
Checksig bitcoin miner new restrictions imposed by segwit only affect transactions that no one would currently make use of because:. The affected transactions would be non-standard, and thus not relayed by the vast majority of nodes or mined checksig bitcoin miner most miners.
This makes it impossible to achieve double spends of segwit outputs by relaying one transaction through old nodes and a different transaction through segwit nodes. However, checksig bitcoin miner differences checksig bitcoin miner still be used to attempt a double spend, for example by combining a non-segwit output and a segwit output in a single transaction that will only be relayed via the upgraded segwit nodesthen attempting to double-spend it via a higher fee transaction only using the non-segwit output, which may be successfully relayed via checksig bitcoin miner old nodes.
These concerns only affect unconfirmed transactions in the mempool; once a transaction is confirmed and mined in a block, double spending remains impossible. Existing methods for monitoring double spends should remain equally effective, provided the monitoring tools are able to track segwit spends at all. Ensuring miners mine valid checksig bitcoin miner is obviously a high priority to everyone involved, and significant work has gone into guaranteeing this is the case with segwit.
If the segwit soft-fork were reverted after being activated, this could allow anyone who had made segwit transactions to lose funds — for example, a malicious miner could replay the transaction on a chain without segwit enabled, at which point it would be anyone-can-spend, and the miner could then steal the funds by spending it to themselves.
There are two ways in which a segwit soft-fork could be reverted after being activated while allowing theft of segwit-enabled transactions:. Miners could simply use checksig bitcoin miner that does not recognise segwit rules such as earlier versions of Bitcoin Core to mine blocks on top of a chain that has activated segwit. This would be a hard-fork as far as segwit-aware software is concerned, and those blocks would consequently be ignored by Bitcoin users using segwit-aware validating nodes.
If there are sufficiently many users using checksig bitcoin miner nodes, such a hard-fork would be no more effective than introducing a new alt coin.
Significant work has gone into ensuring that segwit enabled peers will checksig bitcoin miner a strongly connected subgraph of the Bitcoin P2P network. This includes providing checksig bitcoin miner dedicated service bit for witness enabled nodes and preferentially connecting to such nodes. Segwit updates the 1MB block size limit to a 4M unit block weight limit, counting serialised witness data as one unit, and core block data as four units.
These outcomes may have positive attributes more volume allows more user uptake, for examplebut also have possibly significant negatives:. Larger blocks may result in slower block transmission, resulting in higher orphan rates for miners — this in turn may result in lower security less hashpower required to take over the networkor higher centralisation larger miners being more able to reduce their orphan rate.
Larger blocks will result in higher resource requirements for full nodes, potentially causing users to shut down their nodes, which would result in higher centralisation. Larger UTXO sets will result in higher resource requirements for miners, potentially causing miners to share validation resources, which would result in higher centralisation.
Deployment of Compact Blocks via BIP helps limit the impact of larger blocks on block transmission, and hence orphan rates, and also reduces the bandwidth usage of full nodes. Pruning support allows users to run full nodes without storing the entire history of the blockchain, which allows users who have constrained storage resources to continue running full nodes, even with a larger checksig bitcoin miner size.
The changes to the signature hashing algorithm used by segwit signatures to avoid quadratic scaling, provides a significant reduction in cost for some large transactions.
The deployment of segwit as a soft-fork to ensure the worst-case UTXO growth does not get any worse. Since the maximum amount of data per block is capped at no more than four times the current rate, mitigation work to address problems that arise from large blocks should be within the bounds of relatively straightforward engineering work. Further, since the checksig bitcoin miner amount of data checksig bitcoin miner block is only approximately double the current rate, this means any necessary mitigation efforts should be further checksig bitcoin miner.
There is ongoing work to improve on-disk and network serialisation of transactions and blocks, further reducing the storage and bandwdith requirements of running a full node. The security of the Bitcoin blockchain is provided by hashpower, which is rewarded by both a fixed block reward and by fees from individual transactions. As a result, decreases in fee income have the potential to reduce the hashpower used to mine Bitcoin, which in turn may lower the security of the Bitcoin checksig bitcoin miner.
In so far as the individual transaction fees are determined by market forces and supply and demand, the changes introduced by segwit may risk lowering prices by increasing supply presuming that demand does not also rise, either because of or at least concurrent with segwit deploymentand lower individual prices may result in lower overall mining revenue if the price elasticity of demand is in the inelastic range.
If this leads to users treating layer two solutions as a substitute checksig bitcoin miner on-chain transactions, this checksig bitcoin miner significantly decrease demand for on-chain transactions, which would put additional downward pressure on transaction fee levels. Fees are currently approximately 0. In addition, fees have been rising over the past twelve months both in BTC denominated value checksig bitcoin miner under 0.
This approach has the potential to prevent any fee decreases due to increased supply or indeed to increase individual fees by reducing supply, though that may not increase overall revenuebut cannot prevent decreases to fee income due to substitution effects such as the adoption of layer two networks. While layer two networks may act as a substitute for on-chain transactions, they cannot avoid on-chain transactions entirely, and in some scenarios, even these comparatively few on-chain transactions from layer two networks can easily saturate the on-chain capacity with segwit enabled.
Even if only a very small amount of the value of these networks are captured via on-chain transaction fees, this would likely be substantially above the current fee value. As described above, full adoption of segwit by all transactions is expected to approximately double capacity. This provides a significant one-time increase in capacity, in either the short or medium term, depending on the speed of adoption.
In addition, by adding features to enable layer two networks, some additional medium and long term scaling may be achieved. By fixing the quadratic sighash scaling bug, segwit also reduces the risk of negative impacts due to future capacity increases. Segwit does not, however, provide checksig bitcoin miner direct mechanism for scaling on-chain transaction volume further other than that one-off doubling.
This runs this risk that approaches to checksig bitcoin miner scaling may be prevented or delayed: Additionally, checksig bitcoin miner that has made the scale increases segwit allows achievable such as libsecpk1 and compact blocks have also, obviously, made further potential scale increases more achievable. Segwit does not make further scaling any more difficult on any technical level — the risk here is entirely social.
As a consequence, the most effective mitigation efforts are checksig bitcoin miner also social in nature: That segwit enables transaction volume to increase to approximately double current levels also provides the opportunity to demonstrate the actual impact of scaling, such as on node performance, decentralisation, and transaction demand, as well as the speed with which ecosystem upgrades can be undertaken.
This data could reasonably be collected and used to support future scaling efforts, either by showing that some feared outcomes are less likely than expected, or by confirming valid concerns and allowing work to be focused on addressing those concerns. This section provides checksig bitcoin miner brief comparison with some alternative approaches to achieving some or all of the benefits of segwit, and how those different approaches might change the costs and risks involved.
Due to the comparative lack of experience with hard-forks in the Bitcoin community, unexpected risks and costs might also occur, though that is obviously hard to analyse by its very nature. This would save the bytes from the coinbase transaction, but does not offer any other advantages. Additionally, separate code checksig bitcoin miner to manage old style transactions would checksig bitcoin miner to be kept, increasing code complexity and the possibility of bugs.
BIPFlexible Transactions presents an alternative approach at gaining some of the benefits of segwit via an SPV-visible hard-fork. Either approach to a hard-fork would make it possible to simultaneously drastically alter the consensus limits checksig bitcoin miner blocks. Many of the benefits of segwit could logically be separated checksig bitcoin miner independent changes, and evaluated and deployed separately.
The implementation requirements for the various features are, however, closely checksig bitcoin miner. Doing these fixes independently would increase the complexity of the Bitcoin codebase due to the need to handle different features being active at different times on the blockchain; while deploying them concurrently removes this complexity. Since segwit only allows increased signature operations via the updated opcodes, the old opcodes remain naturally limited.
In contrast if a capacity increase were applied independently, additional limits would need to be implemented to ensure the increase was safe, likely adding complexity to mining and fee calculation. Segregated Witness Costs and Risks by.
Introduction Aims Serialisation costs Rationale Future reductions Block validation costs Risk of introducing bugs Avoidance Mitigation Risks related to complexity and technical debt Checksig bitcoin miner Mitigation Risks checksig bitcoin miner to soft-fork deployment Avoidance Risks due to larger blocks Avoidance Mitigation Risks due to lower fees Avoidance Mitigation Risks related to long term scaling Avoidance Mitigation Alternative approaches Hard-forked segwit Simpler segwit.
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