Ted Rogers, the president at Xapo, a widely utilized cryptocurrency wallet and vault, has revealed that the platform has activated Segregated Witness (SegWit), the scaling solution developed by the Bitcoin Core development team.
SegWit Adoption and Importance of Xapo
Earlier this month, Tom Metcalf at Bloomberg reported that Xapo’s cold wallet stored in its underground bunkers in Switzerland oversees more than $10 billion worth of bitcoin, an amount that is larger than 5,670 banks in the US. Xapo manages more deposits than 98 percent of the banks in the US.
Ryan Radloff, the founder of CoinShares, an investment company that has more than $500 million worth of bitcoin stored in Xapo’s cold wallet, stated that the vast majority of large-scale investors that do not hold or manage their own private keys have their bitcoin stored in Xapo’s vaults.
“Everyone who isn’t keeping keys themselves is keeping them with Xapo,” said Radloff.
Billionaire investor and LinkedIn co-founder Reid Hoffman echoed a similar sentiment as Radloff and stated that Xapo is the first and one of the very few successful companies to have commercialized custodial and security functions in the cryptocurrency industry.
“They’re the first folks who recognized custodial and security functions would be key. He made the pitch in the morning and in the afternoon I called him with an offer,” said Hoffman, who invested more than $20 million in Xapo in 2014.
While Coinbase and Blockchain have significant influence over the consumer market and individual investors, Xapo has dominance over the institutional market within the cryptocurrency sector, directly dealing with institutional investors and retail traders.
Large-scale investors who have their funds in cryptocurrency stored in Xapo’s vaults do not tend to move small amounts of bitcoin on a regular basis. Because it takes around 24 hours for Xapo to transfer bitcoin stored in its vault to the hot wallet of users and the process requires a higher fee than normal bitcoin transactions, investors prefer to move large sums of bitcoin in and out of Xapo’s vaults.
By eliminating unnecessary transactional data and moving additional information outside of the transactional data, SegWit optimizes transactions and decreases the amount of fees users are required to pay to miners to have their transactions broadcasted to the bitcoin blockchain network.
Xapo’s integration of SegWit will enable large sums of bitcoin to be processed on the bitcoin blockchain network as SegWit-enabled transactions, drastically decreasing costs and burden on the main blockchain network.
Ethereum and other smart contract-based blockchain networks that are required to process larger chunks of data in comparison to bitcoin are developing innovative solutions like sharding and plasma that divide the blockchain network into chunks and allow for a more efficient method of information processing.
The bitcoin blockchain network is currently experimenting with Lightning Network as the second-layer blockchain solution to process smaller transactions in a larger capacity and SegWit as a scaling solution for its first or base layer.
The adoption of SegWit as a scaling solution by widely utilized cryptocurrency platforms like Xapo and Blockchain will enable SegWit to evolve into a technology that transforms bitcoin from a store of value to a scalable currency.