Image Credit: Skalex.io
As we all know, Bitcoin is the largest cryptocurrency in the world by market capitalization. As the first cryptocurrency created, its demand has always been high in most crypto markets, and many investors have long taken their interest in investing with BTC. Although after a few years since its launch in 2009, it was inevitable to improve the network. Many changes were employed in Bitcoin transactions, and one of those is the Segregated Witness or SegWit.
SegWit was the most significant Bitcoin protocol upgrade to date, combining numerous enhancements and fixes into a single package. In this article, we will get to glance at one of the most known terms in the world of cryptocurrency. First, let’s see the story behind it!
A brief history of Segregated Witness (SegWit)
Dr. Pieter Wuille originally proposed the idea for SegWit at a Bitcoin conference in 2015. Wuille is a Bitcoin creator and the co-founder of Blockstream, a software firm specializing in financial services digital security.
Witnesses are the transaction signatures and segregate means to separate. As a result, “Segregated Witness” refers to the separation of transaction signatures.
Wuille proposed SegWit as a remedy to a Bitcoin protocol issue—that is, transaction malleability. The term is a geeky way of expressing that minor transaction information may be changed to steal Bitcoin from users. Moreover, he recommended that the digital signature be separated from the transaction data to alleviate the problem.
Is SegWit a fork? What did SegWit’s fork do?
Yes, SegWit is indeed a Bitcoin fork. A fork is essentially an open-source code change. It causes changes to the underlying project’s behavior from that point forward, which might be soft or hard forks.
SegWit falls under the type of soft fork, which means that it doubles the number of transactions in every Bitcoin block without dividing the chain in two.
As mentioned above, SegWit addressed a problem known as transaction malleability, which allowed BTC transaction data to be modified before the network processed them. SegWit will enable Bitcoin to preserve the integrity of transactions while fitting more of them into a single 1-megabyte block by allowing signature (or “witness”) information to be kept outside of (or “segregated” from) a block of relevant transactions while still verifying them. As a result, Bitcoin is now quicker and more secure.
What are its advantages?
- Transaction malleability is no longer an option. SegWit is a straightforward and inventive solution to a severe flaw in the Bitcoin system.
- Bitcoin transactions are completed faster. The Bitcoin blockchain is made lighter thanks to SegWit. It enables the processing of additional transactions without increasing the total size of the Bitcoin blockchain.
- New and exciting innovations may likely emerge. Bitcoin must overcome the challenge of scalability if it wants to service a network of millions of users. SegWit aids in the realization of scalability initiatives such as the lightning network.
- SegWit encourages the creation of second-layer protocols like the lightning network. Any functionality that relied on unconfirmed transactions became less dangerous and easier to develop than the malleability patch. The lightning network will increase bitcoin’s transaction capacity by off-chaining frequent, tiny transactions and only settling on the blockchain when users are ready.
What are its disadvantages?
- SegWit has split the Bitcoin community. Several hard forks have resulted from the disputes over SegWit. Bitcoin Cash (BCH) is the most well-known of these.
- It is a band-aid approach to long-term issues. Some experts believe the SegWit protocol does not go far enough to address the scalability issue. They think that only significant modifications to the Bitcoin blockchain’s size and transaction processing will enable the platform to expand in the future.
- There are not enough nodes using it. Many miners dislike SegWit. Lower fees impact their profitability, and they do not like having to sustain the witness-data sidechain, which generates no fee income. Other Bitcoin services, such as wallets, have been reluctant to embrace the SegWit upgrades.
Only 14% of Bitcoin transactions were done using SegWit Bitcoin in February 2018, over six months after it was implemented. Since then, the numbers have improved, but the network is still far from being fully upgraded.
Q: I am interested in Bitcoin trading. What step should I take first?
Bitcoin trading offers several benefits, but it also carries the danger of financial loss. Continue to be curious about cryptocurrencies and learn more about them. To begin, you may register on this crypto trading platform to participate in a basic trading process.