What is SegWit (Segregated Witness), and how does it work?


In the crypto world, the term SegWit has been making headlines since its introduction in August 2017. It is a technical improvement in the Bitcoin network to address the scaling issues faced by Bitcoin. It’s a subtle yet effective upgrade that enhances data storage within a block, boosting efficiency and bolstering security measures. In this article, we will explore what SegWit is, the need for it, how it works, and its impact on the blockchain.

Introduction to SegWit

SegWit, short for Segregated Witness, is a Bitcoin protocol upgrade. Proposed by Bitcoin core developer Pieter Wuille in December 2015, it was activated after a long and heated debate within the Bitcoin community. The main aim of SegWit is to increase the Bitcoin network’s capacity by optimizing the way transaction data is stored in a block.

What is SegWit?

SegWit is a solution to the scalability problem of Bitcoin. It increases the Bitcoin network’s capacity by separating the transaction and signature data. In other words, it separates the witness data (signature data) from the transaction data and stores it outside the block. This reduces the size of the transaction and allows more transactions to be included in each block, increasing network’s overall capacity.

The need for SegWit

The Bitcoin network has been facing scalability issues for quite some time. The maximum block size of Bitcoin is limited to 1MB, meaning each block could include only a limited number of transactions. The limitation leads to slow transaction-processing times and high transaction fees during periods of high network usage. SegWit was proposed as a solution to these issues.

How SegWit works

SegWit works by separating the digital signature data from the transaction data. The separation allows for more space in each block, which in turn means it can process more transactions. The result is a faster network that can handle more transactions with lower transaction fees.

Transactions and blocks

In the traditional Bitcoin protocol, each block contains a maximum of 1MB of data. The data includes transaction information, digital signatures, and other metadata. SegWit changes the way the data is stored in a block. Instead of storing the digital signatures within the block, SegWit stores them in a separate data structure called the Witness. This witness data is stored outside of the block, which means that the network can increase the block size limit without affecting the size of the transaction.

The SegWit upgrade

SegWit is a soft fork upgrade, which means it is backward-compatible with older versions of the Bitcoin software. This makes it easier for users to upgrade their software without disrupting the network. A majority of Bitcoin users have adopted the upgrade.

The impact of SegWit on blockchain

The implementation of SegWit had a positive impact on the Bitcoin network. There has been an increase in the block size limit, improving transaction-processing times. The reduced transaction fees have made Bitcoin more accessible to users, leading to the development of new applications that can utilize the increased capacity of the network.

What is transaction malleability?

Transaction malleability is a known issue in the Bitcoin network that allows a malicious actor to change the transaction ID before it is confirmed. In simpler terms, transaction malleability is the ability to alter the digital signature that identifies the transaction, making it look like a different transaction.

The issue can cause several problems in the Bitcoin network, including the possibility of double-spending. Double-spending happens when a user spends the same Bitcoin more than once, which can result in the loss of funds for other users.

How does SegWit solve transaction malleability?

SegWit is a solution to solve the transaction malleability problem in the Bitcoin network. It separates the transaction signature from the transaction data, which makes it impossible for a malicious actor to alter the transaction ID.

The SegWit data is stored in a different block, which means there is an increase in block size without affecting the size of the blockchain. This solution makes transactions faster, more efficient, and more secure.

Advantages & disadvantages of SegWit

One of the advantages of SegWit is that it makes the Bitcoin network more secure by eliminating the possibility of transaction malleability. It also increases the block size limit, which allows the network to process more transactions at the same time. This solution also reduces transaction fees, which is good news for Bitcoin users.

Conversely, users often complain that the protocol is a temporary solution to the scalability problem in the Bitcoin network. They argue that a better solution would be to increase the block size limit even further, which would allow the processing of more transactions at the same time.

The future of SegWit

SegWit enables faster and more efficient transactions by separating transaction signatures from the main block. As the technology continues to evolve, the future of the protocol looks promising. It will be interesting to see how it further enhances blockchain networks and what innovative solutions it enables for the future.

Upcoming developments

SegWit still has scope for improvement after its successful adoption in the Bitcoin network. One of the upcoming developments is the implementation of the Lightning Network, which will allow faster and cheaper Bitcoin transactions.

The Lightning Network is a second-layer solution that allows transactions to be processed off-chain, meaning the network does not have to record them on the blockchain. This solution would make Bitcoin transactions even faster and more efficient.

The road ahead for SegWit

The future of SegWit is promising, as many businesses and wallets are already adopting it. Its implementation has also paved the way for other solutions that can make the Bitcoin network more scalable and efficient.

However, one challenge that the protocol faces is the resistance of some users who oppose any change in the Bitcoin network. However, the benefits of the protocol are undeniable, and more users will likely adopt it in the future.


The implementation of SegWit has positively impacted the Bitcoin network, improving transaction processing times and reducing transaction fees. It solves the transaction malleability problem, making the network more secure. Some users dismiss the protocol as being a temporary solution to the scalability problem. Still, it looks set for a promising future.


The significance of SegWit

SegWit is a significant solution that has solved a long-standing problem in the Bitcoin network. It has increased the security and efficiency of Bitcoin transactions, opening the door to other solutions that can improve the network.

How SegWit can benefit the crypto Industry?

SegWit can benefit the crypto industry by making transactions faster, cheaper, and more secure. The protocol also makes integrating new technologies like the Lightning Network easier. Additionally, it enhances the security of the blockchain, making it less susceptible to attacks.

What are the benefits of using SegWit?

SegWit (Segregated Witness) offers faster transactions and lower fees for Bitcoin and other compatible cryptocurrencies. It also enables the implementation of second-layer solutions like Lightning Network, enhancing scalability and network efficiency.

Are there any risks with using SegWit?

Using SegWit generally improves transactions, but there are minor risks. Some older wallets might not support it, causing compatibility issues. Always check wallet compatibility before sending funds.

What problems does SegWit solve?

SegWit solves Bitcoin’s transaction malleability issue, reducing the risk of fraud and enabling the implementation of second-layer solutions like Lightning Network. It also increases block capacity, improving scalability and reducing fees.

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered investment/financial advice from CoinSwitch. Any action taken upon the information shall be at the user’s risk.

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