There has been a buzz in the cryptocurrency community about a new protocol upgrade that has the potential to help resolve scalability issues with Bitcoin. The protocol is called SegWit. Those who support the protocol point to its ability to eliminate transaction malleability and increase block sizes as valuable improvements on the Bitcoin blockchain. Here’s a look at SegWit and what it is intended to accomplish.
A New Way of Storing Transaction Data
SegWit is the shortened name of a protocol called Segregated Witness. The protocol was developed by Pieter Wiulle in 2015. That same year Wiulle presented the idea of SegWit to the attendees of a conference focused on scaling for Bitcoin. Figuring out a way for Bitcoin to scale has been an ongoing concern of the token’s core development team.
Litecoin was actually the first to implement SegWit into its blockchain platform in May of 2017. Just three months later it was also activated on the Bitcoin platform. SegWit was fully compatible with existing protocols. This means that there was no need for a hard fork to apply the new program.
There was one primary objective in the deployment of SegWit. It was meant to fix a security issue that is known as transaction malleability. This issue permitted someone to change the transaction ID and hash but not the content as it existed on the blockchain. SegWit provided a simple fix for this issue. It removed the signature information from the base transaction block and stored it separately. If a signature is changed or altered, the transaction ID remains the same.
The Side Benefits of SegWit
It was also soon discovered that SegWit had a very important side benefit. By removing the signature information from the block of data, the size of data in the block could be reduced. This is important because blocks are limited to 1MB in size. This has been a stumbling block in terms of how fast Bitcoin can process transactions. About 7 transactions per second can be managed on the Bitcoin network, far below a number that would make it competitive with other methods of payment processing.
Basically, Segwit doesn’t increase the limitation on the block. That remains at 1MB. What it does is allow more transactions to be placed in the block. It can achieve this by means of something known as “block weight” which puts a 4MB cap on signature data. The transaction data and the signature data can be separated so as not to increase the 1MB block. More space means more transactions per block, and more transactions per block means faster processing.
Another side benefit of SegWit is that it supports second layer protocols. This means that it can integrate with applications like the Lightning Network. The Lightning Network has the further potential to improve Bitcoin transaction processing by removing small and frequent transactions from the network and storing them off-chain. These transactions can then be settled when the parties involved are ready to do so.
SegWit has also encouraged the development of features like Schnorr Signatures, yet another attempt to speed up transactions. The protocol has provided the only practical solution to the problem of Bitcoin scaling. Other proposed methods have not succeeded.
There has also been an attempt to develop a SegWit2X which would further expand the potential size of each block on the blockchain. This effort, however, seems to have failed for the time being. Despite all of the improvements that SegWit has brought to the table, the debate about Bitcoin’s ability to scale continues to rage on.
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