What is Segregated Witness (SegWit) and How Does it Work?
SegWit’s primary objective is to increase the throughput of transactions on a blockchain network. It’s worth mentioning that Litecoin was the first cryptocurrency to deploy the SegWit layer, not Bitcoin.
In essence, SegWit decreases the weight of transactions in a blockchain block by dividing them into two portions, thereby boosting the number of transactions included in a block of the same size.
The first section of a transaction provides the sender’s and receiver’s wallet addresses, while the second section contains “witness data” comprising transaction signatures. SegWit eliminates “witness data” from the main block, significantly lowering the size of transactions. As a result, transactions take up less space, allowing for more transactions per block and considerably expanding the Bitcoin network’s capacity.
Understanding the SegWit protocol (Segregated Witness)
Numerous systems make up the bitcoin blockchain that is dispersed throughout a peer-to-peer network. These systems are referred to as nodes, and they are responsible for administering bitcoin transactions. Because all bitcoin transactions are replicated throughout multiple nodes, it is challenging to hack into and damage a trade using this method.
The transaction data that is exchanged across several nodes consists of two components: inputs and outputs. The transaction data is composed of two parts: inputs and outputs. In a transaction, there might be one or many inputs and outputs, depending on the circumstances. When the operation is completed, the result contains the recipient’s public address. The public address of the sender is provided as input. To deliver cash to the recipient, the sender must first get the recipient’s public mailing address. The signature, a component of the information, takes up the bulk of the available space in a transaction and certifies that the sender has the money necessary to complete payment. As a result, with each transaction sent, a bitcoin goes from its inputs to its outputs. Once each node has confirmed that the transaction is genuine, the transaction is put in a block added to the chain or the general ledger and made available to the broader public.
Bitcoin Platform Challenges
One of the issues that the bitcoin platform has previously encountered is that more blocks must be added to the chain when the number of transactions increases. Blocks are created every ten minutes and are limited to one megabyte in size (MB). Due to this limitation, a block can only contain a finite amount of transactions. The weight of the transactions, represented by the blocks, is straining the network and creating delays in processing and validating transactions, with some transactions requiring hours to certify as genuine.
Consider all bitcoin transactions since the currency’s launch in 2009, continuously building upon the blockchain. In the long run, the system would be unsustainable unless drastic changes were made.
What are the advantages of SegWit?
SegWit is a Bitcoin protocol enhancement that has been embraced by the majority of Bitcoin-based services. Users of Bitcoin and cryptocurrency exchanges may simply check if the exchange they are using supports SegWit transactions by doing a fast Google search. However, SegWit’s usefulness to Bitcoin extends beyond just shrinking blocks and speeding up the network.
What are the downsides of SegWit?
Even though SegWit transaction adoption was increasing and reached an all-time high of more than 65 per cent at the start of 2020, possible Bitcoin network adaptations take significantly longer than those in altcoin networks, owing to Bitcoin’s sheer significance and size. There is simply too much at stake. On a related topic, not everyone, even today, supports SegWit transactions.
Why should we use it?
Segwit is an acronym for “segregated witness,” It refers to a mechanism for lowering bitcoin transaction costs. Segwit appends all signature data to the end of a bitcoin block, combining the signatures of all transactions. This enables more transactions to fit into the same amount of space while retaining the bitcoin blockchain’s security. The primary advantage of increasing the number of transactions per block is that each transaction’s cost decreases compared to legacy transactions.
Segwit addresses are distinct from traditional bitcoin addresses, and specific third-party wallets and services may not support SegWit addresses. Within the same wallet, Zion supports both SegWit and legacy addresses, and you may swap between them at any moment.