Segregated Witness (SegWit) is a Bitcoin network upgrade that increases block size limits by separating signature data from transaction data, improving scalability and security.

Understanding Segregated Witness (SegWit)

Segregated Witness, commonly known as SegWit, is a protocol upgrade that has significantly improved the Bitcoin network. It addresses two major issues: scalability and security. Let’s explore how SegWit achieves this.

What is Segregated Witness (Segwit)?

Introduced by Peter Wuille in 2015 and activated in 2017, SegWit is a soft fork—compatible with previous Bitcoin protocols. It separates signature data from transaction data within the blockchain. This separation leads to increased block capacity and enhanced security.

How SegWit Works

  1. SegWit reallocates signature data (the witness) from the main block structure to a separate structure.
  2. It permits nodes with the upgrade to process transactions without the witness data initially, optimizing validation times.
  3. By detaching the witness data, it effectively increases the block size limit. More transactions fit into a block, reducing fees and speeding up processing.
  4. SegWit also resolves the transaction malleability issue, preventing manipulation of transaction IDs.
  5. For SegWit’s advantages, users must adopt SegWit addresses starting with ‘3’ or ‘bc1’.

SegWit’s implementation allows for more complex transaction types and paves the way for second-layer solutions like the Lightning Network. These enhancements have made Bitcoin more robust, efficient, and ready for increased adoption.