SegWit: What is SegWit?
SegWit (Segregated Witness) is essentially a response to the Bitcoin scalability problem and struggle to handle the increasingly large transactions. SegWit was activated in 2017 as a Bitcoin protocol update to help make Bitcoin transactions smaller and allow Bitcoin to handle more transactions at a go.
In the past, digital signatures alone made up for at least 65% of the transaction size for a transaction. But when signature data is removed from the transaction data, the block size limit on the blockchain increases.
The removal of specific parts of the transaction expands the transaction capacity of Bitcoin. Hence, Bitcoin can progressively handle more transactions. With that in mind, let’s take a look at how SegWit works and its main benefits.
The Main Benefits of SegWit
- Increase of Block Capacity
The increase of block capacity is one of the most significant benefits that SegWit offers. Just by removing the signature data, a single block can handle more transactions. A transaction contains two major components; the outputs and inputs. The input carries the sender’s public address, and the output has the recipient’s public address.
However, for the sender to confirm that they have transferred funds, they must do so with a digital signature. This signature data can take up to 65% of the block, but SegWit helps to move this data from the transaction’s input. That effectively increases the block size from 1MB to 4MB. SegWit is essentially the engineering solution that helps to increase the block size effectively.
- Increases Transaction Speed
SegWit makes it possible for the block to handle more transactions. Simultaneously, it helps to increase the speed of transactions as the blockchain can now manage many transactions. In essence, the block may take the same time to mine; but more transactions are being processed in the block. The increase in speed has consequently reduced the transaction costs on the Bitcoin network.
- A Fix to the Transaction Malleability
Initially, Bitcoin had a significant issue where it was easy to tamper with the transaction signatures. That means transactions between two parties could easily be tampered with. But SegWit now ensures that the signatures are no longer a part of the transaction.
That removes the possibility for anyone to corrupt the data. This is something that has even allowed further innovation within the blockchain community, like smart contracts.
SegWit is indeed one of many upgrades made to Bitcoin that allow scalability for mass adoption. This fundamental change opens up a road for further developments on the Bitcoin network. And as much as this was not mentioned earlier on in the article, not everyone in the Bitcoin community was happy with the introduction of SegWit.
Even today, there are still people who don’t use SegWit, although the adoption has been steadily increasing over the years. That is why some of the most prominent critics of SegWit went ahead and created Bitcoin Cash, a hard fork of Bitcoin.
All in all, SegWit makes transactions cheaper, which is very important to most Bitcoin users. We can’t be entirely sure whether or not SegWit will achieve full adoption. But with the benefits it presents to the users, it could have a good chance.