After 5 years of existence in the Bitcoin network of the function of segregated witness ( Segregated Witness or SegWit, for its acronym in English), the cryptocurrency exchange BitMex added support for BTC withdrawals using this format. This will allow users to pay lower fees and the exchange to save 65% on block weight.
According to a statement published on March 18, 2021, BitMex announced that will allow its users to withdraw bitcoin with the Bech32 addresses , which are the ones that natively support the segregated token standard.
The company expands on this idea in the following tweet:
We will soon issue Bech32 addresses to all new BitMex users and migrate current users to new directions in the next phases. We are excited about this because it will help increase efficiency and reduce withdrawal fees (on the Bitcoin network).
It is worth remembering that the exchange had already posted on its blog, on December 12, 2019, a press release announcing the enablement of support for shipments in Bech32 format. On that occasion, BitMex recalled that the Bitcoin network supports three address formats.
The first, the format original address, is the one that involves paying the public key hash (P2PKH), whose addresses begin with the number 1.
The second format is the payment script (P2SH), which allows users to send bitcoin to a secured address via a script without knowing details about it, like a wallet with multiple signatures. This is the type of address where BitMex users deposit their funds. P2SH addresses start with the number 3.
The third is the Bech32 format, also called the native SegWit format, which starts with a bc1 and allows users to take full advantage of token scalability segregated, greater efficiency and lower rates.
The company reported that when spending from a format other than Bech32, the user adds about 20 bytes of transaction data. It also points out that the native expenses of SegWit save around 37%, compared to traditional transactions; and 17% relative to non-native SegWit transactions.
As explained above, SegWit can result in significant savings of around 25 to 40% of weight in one block. However, in the case of BitMex, the savings will be even greater. A BitMex withdrawal is a 3 to 4 multi-signature P2SH transaction, each entry therefore requiring three digital signatures and four public keys. Currently a typical withdrawal on BitMex is 2 inputs and 2 outputs, and can be as large as 1,200 bytes. The benefits of applying the segregated token discount to these large transactions are much greater than for typical transactions. Therefore, BitMex will benefit from around 65% block weight savings by adopting SegWit.