Segregated Witness

What is Segregated Witness (SegWit)? 

Segregated Witness (SegWit) is a software improvement for the Bitcoin network to address scalability problems by raising the block size limits. SegWit does this by detaching signature data, which reduces the transaction size. This frees up space for more transactions on the same block. 

SegWit was applied in August 2017 after being suggested by Bitcoin developer Peter Wiulle during a Scaling Bitcoin Conference in 2015. The literal meaning of the term is “segregation of transaction signatures.” 

Why Segregated Witness (SegWit) is Needed

SegWit was implemented almost immediately because it was a prime need of the time. The Bitcoin blockchain is extremely slow and can only process seven transactions in a second. The number of transactions increases whenever prices rise, and the network bogs down. The high traffic leads to a congested network, higher fees, and long confirmation periods. 

Since the average transaction consists of 60% signatures, taking them off the block allows for quicker confirmation processing. In addition, the digital signature helps to confirm the availability of funds to run the transaction. 

A bitcoin transaction consists of the sender’s address at the input end and the receiver address as the output. The digital signatures were included at both ends to assure availability of funds. 

SegWit removes the signature from the input and places it at the end of the transaction. This means that the transacting identity cannot be altered. This feature is a security fix, as the input transaction ID can be changed to deceptively receive Bitcoins from the sender. 

A new SegWit proposal is SegWit2x, which aims to change the transaction process by increasing Bitcoins blocks from 1MB to 2MB. However, since this requires a more considerable modification, it could not reach consensus amongst developers and was eventually dropped.