SegWit

• 1. Separating The Signature

  ›

  Segregated Witness, formally known as Segregated Witness (Consensus layer), is an implemented soft fork change in the transaction format of bitcoin. This upgrade carries the identifier BIP141 and serves to prevent nonintentional bitcoin transaction malleability. It also allows optional data transmission while bypassing certain protocol restrictions like the block size limit through a soft fork mechanism. The core technical shift involves splitting the transaction into two distinct segments. The original section continues to hold sender and receiver data for standard counting purposes. A new witness structure appears at the end containing scripts and signatures instead. Each byte within this witness segment counts as only one quarter of its real size during calculation.

  23

• 2. The One Megabyte Wall

  ›

  Bitcoin operates on a network where blocks contain information about who sends and receives units of currency. Originally there was no limit to the size of these blocks. Malicious actors exploited this freedom by creating fake block data that was very long. These attacks functioned as denial-of-service attempts designed to slow down the entire system. Detecting such fake blocks took a very long time and caused significant delays. Consequently, developers introduced a strict block size limit of 1 MB to protect the network. This constraint creates scalability issues because a new block adds to the chain at random intervals averaging ten minutes. Together with the size cap, this limits how many transactions can be processed in any given timeframe.

  56

• 3. Broken Transaction Links

  ›

  A transaction uses unused outputs from previous transactions known as unspent transaction outputs or UTXO. These form a chain of related transactions linked by their unique identifiers. It is possible for someone to change unconfirmed bitcoin transactions without making them invalid. This mutation alters the transaction identifier and renders child transactions invalid. The link between transactions breaks when the parent ID changes unexpectedly. Segregated witnesses solve this issue by serializing signatures separately from the rest of the transaction data. This separation ensures the transaction ID remains stable and immune to external tampering before confirmation.

  8

• 4. The August Lock-In

  ›

  The activation window for the SegWit upgrade started at Midnight the 15th of November 2016 UTC. It ran until Midnight the 15th of November 2017 UTC across the target adjustment period. SegWit would only activate once at least 95% of miners signaled readiness for the upgrade. On the 9th of August 2017, a milestone was reached when 100% of miners between blocks 477,792 to 479,807 signaled support. This meant the upgrade was locked in and fully activated roughly two weeks later. Segregated Witness then activated on the 24th of August 2017 at block height 481,824. Bitcoin price rose almost 50% in the week following this implementation date.

  91014

• 5. Off-Chain Channels

  ›

  SegWit alleviates the scaling problem in two distinct ways through its technical design. It solves transaction malleability thereby enabling the Lightning Network overlay network of micropayment channels. These channels hypothetically resolve the scaling problem by enabling virtually unlimited numbers of instant low-fee transactions off chain. Initially most bitcoin transactions have not been able to use the upgrade immediately after launch. In the first week of October the proportion of network transactions using SegWit rose from 7% to 10%. As of February 2018 SegWit transactions exceed 30% of total activity on the main network.

  711