Segregated Witness (SegWit)

November 21, 2023 - Around 2 mins mins to read

Understanding Segregated Witness (SegWit)

Segregated Witness (SegWit) is a soft fork upgrade to the Bitcoin network that aims to address scalability issues by increasing the block size limits on the blockchain. It achieves this by removing signature data and reducing transaction size, allowing more transactions to be included in each block.

In August 2017, SegWit was activated after being proposed by Bitcoin developer Peter Wiulle during a Scaling Bitcoin conference in 2015. The term “Segregated Witness” refers to the separation of transaction signatures, and the implementation of this update introduced the concept of User-Activated Soft Fork (UASF).

The main motivation behind implementing SegWit was to improve the processing capabilities of the Bitcoin blockchain. Currently, it can only handle seven transactions per second (TPS), leading to network congestion and higher fees during periods of increased transaction activity, such as when Bitcoin prices surge.

To address this, SegWit changes the way transactions are processed by excluding signatures, which account for 60% of a transaction’s size.

In a Bitcoin transaction, inputs represent the sender’s address, while outputs represent the receiver’s address. The digital signature is included to verify the solvency of an account. With SegWit, the signature is removed from the input and placed at the end of the transaction.

SegWit also enhances security by preventing fraudulent manipulation of the input transaction ID to receive Bitcoin from the sender. By moving the signature to the end of the transaction, the transaction’s identity remains unchanged.

Another proposal related to SegWit, known as SegWit2x, aimed to modify transaction batching and increase Bitcoin’s block size from 1MB to 2MB. However, as SegWit2x required a hard fork and represented a more significant change to the Bitcoin protocol, the developer community failed to reach a consensus, resulting in the abandonment of the proposal.