What is Segregated Witness?

Segregated Witness, or SegWit (literally “segregated witness”), is an implemented upgrade to the Bitcoin protocol proposed by the Bitcoin Core development team. Its aim is to optimise block capacity, which in turn should help address Bitcoin’s scalability, block congestion, confirmation speed and fees. Put simply, SegWit increases blockchain efficiency without increasing the block size.

A soft fork is a change to the rules by which a block is validated in the blockchain. A soft fork involves code changes that do not affect the core of the software. By contrast, a hard fork is a more radical and rapid solution that can jeopardise the entire Bitcoin protocol if any mistake is made in its implementation. For example, the solution proposed by the Bitcoin Unlimited developers is a hard fork of the Bitcoin network. More information about forks and the differences between a hard fork and a soft fork can be found here.

First and foremost, Segregated Witness addresses Bitcoin’s scalability problem. It optimises the structure of a transaction block by allowing transaction signatures to be separated from the data being relayed. As a result, transactions take up less space and blocks become effectively more capacious. Activating SegWit also eliminates transaction malleability, paving the way for faster confirmations (including in tandem with another solution called Lightning Network).

The chief advantage of Segregated Witness is that excluding signatures from the 1MB block can effectively increase Bitcoin’s block capacity. That means each block can record more transactions—raising the blockchain’s throughput—without breaking existing consensus rules.

To tackle scalability, Segregated Witness extracts the transaction signature and places it in a separate data structure. When the signature is removed from the transaction, its size decreases—by roughly 47% per transaction. Thus, without changing the block’s nominal size, nearly twice as many transactions can fit in a block.

SegWit also benefits full-node operators by potentially reducing the amount of data that must be stored on disk. In other words, Segregated Witness lowers the requirements for running a full node and cuts the time needed to synchronise with the network.

Activating the solution on the Bitcoin network requires support from 95% of miners. More precisely, after the activation threshold is reached, during one difficulty period of 2,016 blocks (about two weeks) at least 95% of blocks must be mined by miners signalling support for Segregated Witness. The Bitcoin Core 0.13.1 client with SegWit included was released on October 27, 2016.

Support for Segregated Witness in the Bitcoin community has been growing, owing in part to strong trust in the Bitcoin Core team and recently identified bugs in the Bitcoin Unlimited software. Various services track which companies back Segregated Witness, for example Coin Dance.

In April 2017 the SegWit protocol was activated on the Litecoin network. Other, lesser-known digital currencies have also signalled their commitment to Segregated Witness.

ForkLog published a detailed article titled “What is Segregated Witness and how can it improve Bitcoin.” Despite the article’s “venerable age,” it has not lost relevance, as it focuses on the technical side rather than the “dispatches from the battlefield” of Bitcoin Core vs. Bitcoin Unlimited.