What Is Segregated Witness (SegWit)?
Segregated Witness (SegWit) is a soft fork upgrade implemented on the Bitcoin network to address scalability issues by increasing block size limits.
It achieves this by removing signature data from transactions, reducing their size, and allowing more transactions to be included in a single block.
Enhancing Bitcoin’s Scalability
The concept of SegWit was introduced by Bitcoin developer Peter Wiulle during a Scaling Bitcoin conference in 2015, and it was activated in August 2017.
Its name reflects the idea of segregating transaction signatures.
The implementation of SegWit also introduced the concept of user-activated soft fork (UASF).
Addressing Bitcoin’s Scalability Issues
The motivation behind implementing SegWit was to tackle the slow transaction processing speed of the Bitcoin blockchain.
With its original design, Bitcoin can process only about seven transactions per second (TPS).
During periods of high transaction activity, such as when Bitcoin prices surge, the network experiences congestion, increased fees, and significant delays in transaction confirmations.
To expedite confirmations and alleviate these issues, SegWit modifies the transaction structure by excluding the signatures, which typically account for around 60% of the transaction size.
Restructuring Bitcoin Transactions
In a Bitcoin transaction, inputs represent the sender’s address, and outputs represent the receiver’s address.
The digital signature is included to verify the sender’s account solvency.
With SegWit, the signature is removed from the input and placed at the end of the transaction.
This upgrade also provides a security enhancement.
Previously, the input transaction ID could be altered to fraudulently receive Bitcoin from the sender.
By moving the signature to the end of the transaction, the transaction identity becomes tamper-proof.