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Writer's pictureShraddha Khattri

Segwit: The Solution to Bitcoin's Scalability Problem

Bitcoin, the world's first decentralized digital currency, has revolutionized the way we think about money. However, as the number of users and transactions on the Bitcoin network has grown, so have the challenges of scalability. This has led to delays and high fees for transactions, making it difficult for Bitcoin to reach its full potential as a global currency. One solution to this problem is Segwit, or Segregated Witness.

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Segregated Witness (SegWit) is a protocol upgrade for the Bitcoin network. It is a technical solution to address the problem of scalability on the Bitcoin blockchain. Scalability refers to the ability of a network to handle a large number of transactions and users without delays or high fees.


It was first proposed in 2015 and implemented in August 2017 through a soft fork, which means it is backward-compatible, allowing the upgrade to be made with the cooperation of the majority of the network's users and without the need to split the network.


Overall, SegWit is a crucial upgrade for the Bitcoin network that improves the scalability, security and functionality of the network.


How does Segwit works?


Segregated Witness (SegWit) works by separating the signature data (witness) from the transaction data in a Bitcoin transaction. This allows for more transactions to be processed per block, which improves the scalability of the Bitcoin network.


Normally, a Bitcoin transaction includes three key components: the input(s), output(s), and the digital signature (witness) that verifies the transaction. The inputs show where the Bitcoin is coming from, the outputs show where the Bitcoin is going, and the digital signature proves that the person sending the Bitcoin is the owner of the input.


Before SegWit, all of this information was included in the same data structure, which limited the amount of data that could be included in each block. This created a bottleneck, causing delays and high fees for transactions as demand for block space exceeded supply. SegWit solves this problem by separating the signature data (witness) from the rest of the transaction data. This means that the signature data is not included in the block size calculation, effectively increasing the block size limit.


Additionally, SegWit also includes a fix for a transaction malleability bug. This bug allows an attacker to change the transaction ID (TXID) without invalidating the signature, which can cause problems for certain types of transactions and smart contracts. SegWit addresses this issue by modifying the way the TXID is calculated, making it more difficult for an attacker to tamper with the transaction ID.


The segregated witness data is stored in a new structure called a “witness”. It is not considered when calculating the block size, but it still forms an integral part of the transaction and is required for its validation.


Overall, SegWit works by separating the signature data from the rest of the transaction data, which allows for more transactions to be processed per block and improves the scalability, security and functionality of the Bitcoin network.


Pros of SegWit:

  • Increased block size limit: SegWit separates the signature data from the rest of the transaction data, which allows for more transactions to be processed per block. This leads to faster confirmation times and lower fees for transactions.

  • Fix for transaction malleability bug: SegWit addresses a vulnerability in the Bitcoin protocol that allows for the tampering of transaction IDs. This improves the security of the network and enables the development of new technologies like the Lightning Network.

  • Lays the foundation for future developments: SegWit provides the necessary infrastructure for new innovations such as the Lightning Network, which enables instant and low-cost off-chain transactions.

  • Backward compatibility: SegWit can be implemented as a soft fork, which means it is backward-compatible, allowing the upgrade to be made with the cooperation of the majority of the network's users and without the need to split the network.

Cons of SegWit:

  • Initial implementation challenges: SegWit requires a significant update to the Bitcoin protocol, which can be challenging to implement, especially for smaller and less technically advanced companies.

  • Limited adoption: SegWit adoption has been slow, as not all companies and users have upgraded to the new protocol. This can create compatibility issues for some transactions.

  • Additional complexity: SegWit introduces additional complexity to the Bitcoin protocol, which can make it more difficult for some users to understand and use.


Overall, SegWit is a promising solution to the scalability problem of the Bitcoin network, but it also comes with its own set of challenges. It is important to weigh the pros and cons before deciding whether to implement SegWit or not.


In conclusion, Segwit is a crucial upgrade for the Bitcoin network. It addresses the scalability issue and lays the foundation for future developments that will make Bitcoin more accessible, user-friendly and efficient. As more and more people turn to Bitcoin as a store of value and means of exchange, Segwit will play a critical role in ensuring that the network can handle the increased demand.


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