Segregated Witness (SEGWIT)

Segregated Witness (SEGWIT) is a significant upgrade to the Bitcoin protocol aimed at improving scalability and transaction efficiency. By separating transaction signatures (also known as witness data) from the main transaction data, SEGWIT effectively reduces the size of each transaction. This enables more transactions to fit within a single block, increasing the overall capacity of the Bitcoin network. Prior to SEGWIT, the size of a Bitcoin block was limited to 1 MB, but with the implementation of SEGWIT, this limitation has been mitigated, allowing for more efficient use of space.

One of the critical issues SEGWIT addresses is transaction malleability. Before the upgrade, transaction IDs could be altered before confirmation, making it difficult for second-layer solutions to rely on these transactions. By separating witness data, SEGWIT resolves this vulnerability, enabling the development of more advanced technologies like the Lightning Network. The Lightning Network, a Layer Two solution, further enhances Bitcoin’s scalability by allowing off-chain transactions to occur quickly and at a low cost, with only the final state being recorded on the Bitcoin blockchain.