Crypto Exchange Gemini Rolls Out Native Wallet Support For SegWit Bitcoin Addresses (#GotBitcoin?)
Gemini, the crypto exchange founded by the Winklevoss twins, has updated its wallet infrastructure to include support for Segregated Witness (SegWit) bitcoin (BTC) addresses. The news was revealed in a Gemini blog post on April 15. Crypto Exchange Gemini Rolls Out Native Wallet Support For SegWit Bitcoin Addresses (#GotBitcoin?)
SegWit is a scalability solution for the bitcoin network, first activated in late 2017. As well as increasing block size, Segwit moves the “witness” signature data to a separate location. It thus solves what is known as transaction malleability, which is conducive to second-layer solutions like Lightning Network (LN).
Claiming that Gemini is the first major crypto exchange to launch full — rather than partial — SegWit support, the blog post’s author, Brian KimJohnson, wrote that Gemini will enable SegWit addresses to be used for both bitcoin deposits and withdrawals. The platform has also launched support for transaction batching, he reported.
KimJohnson also wrote that Gemini did not make the decision lightly and that its “choice to use native SegWit addresses was based on block space savings as well as safety concerns.”
His arguments in favor of SegWit emphasize that with its segregation of digital signatures from transaction data, “bitcoin transactions weigh around 30–40 percent less, thus taking up less ‘block space’ on the network and reducing the transaction fee.”
The blog post lastly underscores that the support will lay the groundwork for solutions such as LN — a second-layer solution to bitcoin’s scalability limitations, which works by opening payment channels between users that keep the majority of transactions off-chain.
As previously reported, major crypto exchange and wallet service Coinbase and its professional trading platform Global Digital Asset Exchange GDAX — now known as Coinbase Pro — rolled out SegWit support for bitcoin transactions in early 2018.
Both Coinbase Pro and Gemini have recently been included in a newly-launched index for 10 cryptocurrency exchanges from crypto analytics firm Messari. The index, dubbed “Real 10 Volumes,” was evidently created in response to widespread concerns over allegedly rampant fraudulent trade volume reporting among unregulated exchanges.
Cryptocurrency Exchange BitMEX Enables Native SegWit Support
Cryptocurrency exchange BitMEX added support for native segregated witness (SegWit) addresses for Bitcoin (BTC) withdrawals, which lets users pay lower transaction fees.
According to an announcement on Dec. 12, BitMEX now allows its users to withdraw Bitcoin to Bech32 addresses, the one that natively supports the segregated witness standard.
Bitcoin Address Formats
As the announcement explains, the Bitcoin network currently supports three address formats. The first one — Bitcoin’s original address format — is pay to public key hash (P2PKH), which starts with a 1.
The second format is the pay to script hash (P2SH), which allows users to send Bitcoin to an address secured through a script without knowing details about it — such as a multi-signature wallet. This is the kind of address to which BitMEX’s users deposit their funds. P2SH addresses start with a 3.
Lastly, the Bech32 format — also called the native SegWit format — starts with bc1 and allows users to take full advantage of segregated witness scalability, higher efficiency and lower fees. The announcement reads:
“The key advantage of Bech32 addresses is that transaction fees can be saved when spending Bitcoin, which was already sent to a Bech32 address. Therefore this upgrade will not directly result in fee savings when customers withdraw from BitMEX, however in the next transaction, when the bitcoin already withdrawn from BitMEX is spent again, our customers may benefit from lower transaction fees.”
BitMEX also explains that, when spending from an address that is not in the Bech32 format, the user adds around 20 bytes of data to the transaction. The lack of this data in native SegWit transactions saves fees and allows the network to scale more. Overall, native SegWit spends save about 37% compared to traditional transactions and 17% compared to non-native SegWit transactions.
What Is SegWit
SegWit, an update implemented in August 2017, protects against transaction malleability and increases block capacity by separating the data required to check transaction validity (witness) from the list of transaction inputs.
SegWit also added a weight parameter that limits the block size to 4 million weight units, which allowed blocks that are larger than 1 MB without a hard fork. Furthermore, this update was the last change needed to implement the Lightning Network.
The next wallet upgrade planned by BitMEX is enabling non-native SegWit support on its P2SH addresses. The announcement reads:
“As explained above, SegWit can result in significant blockweight savings of around 25% to 40%, however in the case of BitMEX, the savings will be even higher. A BitMEX withdrawal is a 3 of 4 multi-signature P2SH transaction. […]. The benefits of applying the witness discount to these large transactions is far greater than for typical non-BitMEX transactions. Therefore BitMEX would benefit from a blockweight saving of around 65% by adopting SegWit. ”
SegWit support is ever increasing. As Cointelegraph reported in November, major global crypto exchange Bitfinex has also added support for Bitcoin Bech32 addresses.
Bitcoin Network SegWit Adoption Hits 66% After BitMEX Embraces Upgrade
More Bitcoin (BTC) transactions now use so-called Segregated Witness (“SegWit”) technology than ever before, the latest data shows.
According to various resources including SegWit.Space, adoption of the protocol has reached up to 66% of all Bitcoin transactions as of Jan. 4.
Two In Three BTC Payments Now SegWit
The volume underwent a significant increase in late 2019, jumping from around 40% in September to nearer 60% in October.
The statistics, however, are subject to variation. SegWit.Space, a dedicated monitoring resource, lists current SegWit propagation as 66%. Other charts, such as transacationfee.info and Woobull, the data resource by statistician Willy Woo, currently put the figure at around 59%.
All three nonetheless agree on the general trend as highly bullish for SegWit, which has had a long road to acceptance since its release in 2017.
Straggler Exchanges Come On Board
Designed to increase the speed and efficiency of Bitcoin transactions and reduce their bulk, SegWit initially saw slow implementation. Bitcoin proponents argued that exchanges reluctant to make an effort to adopt the technology were putting needless strain on the Bitcoin network.
Binance, one of the world’s largest exchanges by volume, is yet to upgrade, and still uses legacy Bitcoin addresses.
The platform’s CEO, Changpeng Zhao, known as “CZ” in crypto circles, claimed in May last year that developers would be working on addressing the issue. In October, well-known Bitcoin support Udi Wertheimer even pledged to personally advertise Binance if SegWit appeared.
Derivatives giant BitMEX, another exchange sector heavyweight, added native SegWit support to its operations last month.
Gemini Launches Firm To Insure Its Own Crypto Custody Branch For $200M
The Winklevoss’ Gemini Exchange has launched an insurance company to cover up to $200 million for Gemini Custody — reportedly the largest amount for any crypto custody service in the world.
Head of risk at Gemini Yusuf Hussain shared the news with Cointelegraph on Jan. 16. The captive insurance company is called Nakamoto, Ltd. and will secure Gemini’s custody business for up to $200 million.
Aiding Nakamoto, Ltd.’s launch were major traditional insurance brokers Aon and Marsh. Gemini’s custodial clients will also reportedly be able to purchase additional insurance from Nakamoto, Ltd. in order to secure their own holdings beyond the general $200 million.
Hussain said the advancement in the company’s custodial coverage will allow a number of Gemini’s institutional clients to continue to meet their own regulatory requirements. He explained that the move “is consistent with Gemini’s approach of being a security-first, compliance-first, and regulatory friendly exchange and custodian.”
Gemini first launched their custody wing in September.
The State Of Insurance In Crypto
Insurance has been a major barrier to crypto investment services looking to court more risk-averse traditional financial players.
Legendary insurance firm Lloyd’s of London has gotten involved, securing hot wallet holdings for Coinbase as well as Kingdom Trust’s custody business.
Speaking of Gemini’s history with advancing insurance into crypto investments, Hussain pointed to Gemini’s 2018 move to insure hot wallet holdings as further evidence of their desire to provide more security in the industry.
Gemini president Cameron Winklevoss stated, “Obtaining meaningful insurance in the crypto industry remains a challenge, and our captive will help to increase our insurance capacity and move the industry forward.”
Ledger Vault, the custody arm of hardware wallet manufacturer Ledger, acquired a crime insurance policy for custodied assets through insurance company Arch Insurance Limited in November 2019. The policy provides up to $150 million in crime loss coverage for users’ digital assets on the platform.
Deloitte Approves Gemini Crypto Exchange in High-Level Security Evaluation
U.S.-based crypto exchange and custodian Gemini has finished a SOC 2 Type 2 evaluation, proving the operation’s security.
“The Type 2 is the highest level of security compliance that any organization can demonstrate,” Gemini’s head of risk, Gemini Yusuf Hussain, told Cointelegraph in an interview about the Jan. 23 announcement.
In preparation for its SOC 2 Type 2 evaluation, Gemini achieved its SOC 2 Type 1 inspection in 2019, completed by auditing giant Deloitte. The accounting behemoth also completed Gemini’s SOC 2 Type 2 inspection, Hussain mentioned.
A regulatory-focused company, Gemini places a high level of importance on compliance and security with the intent of garnering customer trust, Hussain explained.
Indeed, Gemini released an advertisement campaign a year ago, in which one of several slogans to appear on buses and placards was “Crypto needs rules.”
Noting the importance of protection, Gemini’s head of risk said, “Doing security wrong in this industry will result in direct loss of customer funds.”
The SOC 2 Type 2 exam includes Gemini’s trading and investing platform, as well as its custody services, Hussain said. “We’re the only crypto exchange and custodian to demonstrate this level of security compliance of getting a SOC 2 Type 2,” he pointed out.
Additionally, Gemini has plans to undergo a SOC 2 Type 2 evaluation every year going forward, according to a statement Gemini provided to Cointelegraph.
Earlier this month, Gemini launched Nakamoto, Ltd., an insurance company for its crypto custody service.
Winklevoss’ Gemini Cryptocurrency Exchange Scores Another Security Qualification
The Winklevoss brothers’ Gemini cryptocurrency custodian and exchange has obtained a new security qualification, SOC 1 Type 1.
According to an April 21 blog post by the company’s head of risk, Yusuf Hussain, Gemini became the world’s first digital currency custodian and exchange that was granted a Service Organization Control (SOC) 1 Type 1 certification. The examination was carried out by Big Four accounting firm Deloitte.
Meeting High Security Standards
Passing an SOC 1 review means that Gemini’s financial operations and customer reporting controls comply with requirements set by the American Institute of Certified Public Accountants. Basically, the examination proved that Gemini is capable of mitigating the risk of significant error, omission and data loss. Hussain noted:
“While vital to both our exchange and custody platform, the SOC 1 Type 1 is particularly important to our exchange operations, which execute a significant volume of complex financial transactions for our customers. The SOC 1 Type 1 validates the design and implementation of those operations and the integrity of their corresponding reports.”
In January 2019, Gemini completed an SOC 2 security review.
SOC Standard-Compliant Crypto Companies
Some other crypto projects have also undergone SOC evaluationz. Most recently, the crypto custody arm of major United States-based cryptocurrency exchange Coinbase, Coinbase Custody, procured an SOC 1 Type 2 and a SOC 2 Type 2 report by major accounting firm Grant Thornton.
Last September, business advisory company Aprio confirmed major crypto payment services provider BitPay’s compliance with the SOC 2. Last April, blockchain security firm BitGo, which gained an SOC 2 Type 1 certification from Deloitte in 2018, upped its procedures to conform to the Type 2 requirements of the same standard.
While an SOC 1 report provides information on the internal controls relevant to a user organization’s financial reporting, SOC 2 reports provide information on “security, availability, processing integrity, confidentiality and privacy.”
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