Segregated Witness Deployed on New Bitcoin Testnet: SegNet

Bitcoin Magazine
Segregated Witness Deployed on New Bitcoin Testnet: SegNet

Bitcoin Core developers have deployed an initial implementation of Segregated Witness on a special testnet for Bitcoin, dubbed SegNet. SegNet allows developers to experiment with the highly anticipated innovation set to increase Bitcoin’s scalability, extensibility and performance.

SegNet, like the original Bitcoin testnet, is essentially a clone of Bitcoin, specifically intended as a demo version. Bitcoin Core developers Pieter Wuille, Eric Lombrozo, Johnson Lau, Alex Morcos and several others constructed a set of patches in order to establish the new testnet, with an early iteration of Segregated Witness activated. SegNet was deployed on the December 31, and has been successfully operational since.

Speaking to Bitcoin Magazine, Lombrozo – who’s also CEO of cryptotech software company Ciphrex– emphasized that SegNet is still a work in progress.

“The way we’ve designed the Merkle Tree for signature data might be changing, we’re still considering several options to increase usability for miners, and different parameters are being explored … we’ll end up rebooting SegNet at some point. But it’s operational and we’ve been sending Segregated Witness transactions over it the last several days,” Lombrozo said.

As such, while many of the core concepts are in place, the initial Segregated Witness design will probably see some changes before it’s deployed, too.

“Pieter’s Segregated Witness GitHub branch is still going to be reworked before we merge back into Bitcoin Core,” Lombrozo explained. “We’re not ready to deploy Segregated Witness on the actual Bitcoin network just yet, but SegNet allows developers to experiment, which should benefit the development process.”

Wuille’s Segregated Witness concept was first announced at the second Scaling Bitcoin workshop in Hong Kong last month. The idea is widely embraced by Bitcoin’s development community, and included as a key part of a popular scalability roadmap proposed by Bitcoin Core and Blockstream developer Gregory Maxwell. (Though not everyone this specific road map is the best way forward).

Apart from Bitcoin Core, several wallet providers have so far committed to supporting Segregated Witness once it’s deployed on the Bitcoin network, including Blocktrail,mBreadwallet, GreenAddress, GreenBits, NBitcoin and Lombrozo’s own mSIGNA.

For more information on Segregated Witness, see Bitcoin Magazine’s threepart series on the innovative proposal.

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Bitcoin’s Role as Hedge against Devaluation of Reserve Currencies like Azerbajian’s Manat

While recent global headlines have been dominated by chaos in Chinese and US equity markets, currency markets have also been volatile. The Azerbajiani manat, the national currency of Azerbaijan, has lost nearly 32 percent of its value practically overnight due to the falling price of oil.

On December 18, the value of Manat recorded an all-time low against the U.S. dollar since January 13, 2006, plummeting from 0.96 down to 0.65.

According to the Observatory of Economic Complexity, petroleum oils and gas exports in Azerbajan generated more than $26 billion in income, accounting for more than 90 percent of the economy’s entire revenue.

Due to its heavy reliance on the oil industry, the abrupt price drop of crude oil and gas severely devalued the national currency of Azerbaijan, pressuring the central bank to implement currency flow restrictions and gain control of the foreign exchange market.

“Azerbaijan is an oil country, and countries like Azerbaijan cannot discount the factor of drop in the price of oil — the main source of their budget,” Ali Hasanov, said in an interview with the Azerbaijani Press Agency. “Everyone knows that oil prices in world markets won’t rise in the near future.”

The unexpected devaluation of the manat has affected cross-industry businesses operating in the country and corporations dealing with international suppliers and partners outside of Azerbaijan.

Financial experts including Simon Mandell, senior vice president of Central and Eastern European, Middle East and African equities at New York-based frontier markets brokerage firm Auerbach Grayson, believe that the economy of Azerbaijan will continue to crumble amid the oil price slump and will affect the operations of existing businesses.

Essentially, in the short term, businesses will attempt to avoid the use of the manat until it recovers from its recent price slump. This could lead to disputes between its suppliers, international partners and its customers.

Unfortunately, the manat, like many other reserve currencies in the world including the Nigerian naira are dependent on the performance of certain assets or industries such as oil, and will continue to become more volatile and unpredictable in the upcoming years.

In these situations, it is beneficial for both companies and countries to use independent currencies with high and stable international value and exchange rates such as the U.S. dollar. However, many have suggested that bitcoin may be able to fill this role for trade and commerce both internationally and domestically.

Historically, the price of bitcoin has not been closely correlated with the performance of other currencies or assets. Instead, its price is wholly dependent on the demand of its users and potential buyers as the supply of Bitcoin mined is fixed and predictable. Thus, if bitcoin is able to fill the role of as a store of value and as an independent currency, it could help developing countries such as Azerbaijan avoid financial issues regarding its currency.

As Nick Szabo proposed during the strict capital controls implementation in Greece, every aspect of an economy must embrace bitcoin for it to operate as an independent currency and a store of value.

It will be highly unlikely for economies such as Azerbaijan’s to embrace bitcoin, especially due to its poor financial infrastructure. However, depending on a currency which relies on a single asset to determine its value is risky and detrimental to businesses with international operations.

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