SEGWIT stands for Segregated Witness. SEGWIT is a Bitcoin Network update that went live in August of 2017. Pieter Wuille, a programmer, first announced it in December 2015 at the Scaling Bitcoin conference.
SEGWIT attempts to address a number of problems, including Bitcoin's scalability. Bitcoin transactions are recorded on a blockchain, which is an immutable LEDGER on which transactions are grouped into blocks and chained one after the other to decide their sequence. Every 10 minutes, a new block is formed. Furthermore, the Bitcoin protocol restricts a block's size to 1MB, limiting a Bitcoin block to about 2,700 transactions on average. When a large number of users want to transfer Bitcoin at the same time, the list of transactions waiting to join the network becomes longer and longer. Though Visa can process 1700 transactions per second, Bitcoin can only process 4, which is insufficient for mass adoption. In order for Bitcoin to fully become a global currency, it must first become available on a large scale. It must figure out how to expand its transaction capability.
Transaction malleability is another problem that SEGWIT tackles. A Bitcoin transaction consists of three parts: the sender (input), the recipient (output), and a digital signature that verifies the sender's eligibility to submit the coins. Bitcoin's code, it turns out, enables digital signatures to be changed when a transaction is already being validated. The signature can be changed in such a way that it is still correct according to the network if you run a statistical search on it. When you apply a hashing algorithm to it, though, you get a different answer.
How SEGWIT Works?
A proposed improvement to the way blocks are organized is Segregated Witness. Non-SEGWIT Blocks, also known as Legacy Blocks, have a total storage capacity of 1MB, which includes all block data inputs, outputs, signatures, and additional scripts. SEGWIT blocks, on the other hand, are big 4 MB blocks that have a base transaction block as well as an expanded block. SEGWIT is, in reality, a block size boost, contrary to common belief. The digital signature and other details known as "The Witness" are moved outside of the base transaction block of SEGWIT Blocks. The Witness data will also be sent, but it will be included within the extended block. As a result, the sender and recipient information is included in the base transaction block, while the witness data is left blank to save space. This makes it possible to fit further transactions into the 1 MB transaction block.
The Witness data that isn't used in the base transaction block is included in the extended block. SEGWIT's current block format accomplishes two main goals. The digital signature is first moved outside of the base transaction block. This way, if anyone modifies the transaction's signature, it won't alter the transaction ID, effectively solving the transaction malleability issue. Second, it reduces the size of the transaction info. Since The Witness data accounts for up to 65% of the transaction size, shifting it outside of the base transaction pool allows for further transactions to fit into the 1 MB block.
Why not just raise the block size to 4 MB in the first place if SEGWIT is a block size increase? Why all the fuss and controversy over block sizes if the end product is bigger blocks? The solution is really very straightforward. The Bitcoin network's developers decided to avert a controversial Hard Fork. The Bitcoin Protocol specifies that blocks cannot be larger than 1 MB. As a result, engineers had to devise a method for the network to support both SEGWIT and non-SEGWIT blocks.
A Hard Fork should be stopped if at all possible. The solution of a 1 MB block with a 3 MB extension is still permissible under the current protocol; legacy nodes obtain only the 1 MB transaction block without the expanded block, but they still consider it legitimate. SEGWIT nodes receive both the base and expanded transactions and can fully verify them. A Soft Fork is a term used to describe this backwards compatibility. This method is less dangerous since it does not necessitate node program updates to help SEGWIT. It ensures that the network will continue to operate even though all of the nodes take years to update.
How SEGWIT Blocks Are Measured by Miners?
Legacy Blocks, on the other hand, are calculated in terms of dimension. The weight of SEGWIT Blocks is determined. SEGWIT added a new definition called Block Weight, which is measured per transaction.
Legacy transactions are unable to separate The Witness details from the foundation transaction. As a result, their weight will still be four times that of the sale. On the other hand, SEGWIT transfers would have a weight of less than 4 times the transaction value.
In other words, the bigger The Witness data is, the lighter the transaction weight. Miners would be enticed to choose lighter SEGWIT transactions over heavy ones so they can fit more of them into a base transaction block, potentially increasing the miners charge. If the block is acknowledged and validated, SEGWIT transactions will theoretically generate blocks up to 4 MB in size. The average block size for SEGWIT transactions is around 2 MB in practice. SEGWIT transactions account for almost half of all Bitcoin transactions today. Since legacy transfers are bigger, they necessitate higher network costs in order to be validated quicker.
Conclusion
Legacy addresses begin with a 1, while SEGWIT addresses begin with a 3. Because of its benefits, the SEGWIT ledger is being adopted by a growing number of common wallets and exchanges. Trezor, Exodus, and Coinomi are only a few of the big wallet companies that have already made the switch to SEGWIT.
It's worth noting that if you have a Legacy wallet and wish to switch to SEGWIT, you'll need to build a new SEGWIT wallet and transfer all of your funds to its handle. There's no way to make the old legacy wallet SEGWIT-compatible. SEGWIT is the first of a series of enhancements that will help Bitcoin grow to mass acceptance. It's a significant shift that will clear the way for future changes.
