What is Segregated Witness?

Segregated Witness, commonly known as SegWit, is a crucial upgrade to the Bitcoin protocol that was activated in August 2017. It addresses long-standing issues within the Bitcoin network, primarily aiming to increase transaction capacity and mitigate certain vulnerabilities.

At its core, SegWit separates the digital signature (witness data) from the transaction data in a Bitcoin block. Traditionally, these two components were intertwined, consuming space in a block and limiting the number of transactions that could be included. By segregating the witness data, SegWit effectively increases the block size limit without altering the block's overall size.

This separation brings about several notable benefits. Firstly, it helps alleviate the congestion on the Bitcoin network, allowing for a higher volume of transactions to be processed in each block. This is a critical improvement, especially during periods of high demand, as it reduces transaction fees and enhances the overall scalability of the network.

Secondly, SegWit addresses a vulnerability known as transaction malleability. This occurs when the unique identifier of a transaction can be changed without altering its validity, leading to potential issues for applications built on top of the Bitcoin protocol. SegWit solves this problem by separating the transaction data and the witness data, making malleability less of a concern and providing a more secure environment for the development of second-layer scaling solutions like the Lightning Network.

The activation of SegWit required support from the majority of the Bitcoin network's miners, developers, and users. Once implemented, it marked a significant milestone in Bitcoin's evolution, showcasing the community's ability to reach consensus and implement improvements that enhance the network's functionality and robustness. SegWit's impact extends beyond transaction efficiency, influencing the ongoing development of Bitcoin and contributing to its resilience and adaptability in the ever-evolving landscape of digital finance.