SegWit

What is SegWit?

Segregated Witness, widely known as SegWit and introduced under Bitcoin Improvement Proposal 141 (BIP141), is a significant protocol upgrade to the Bitcoin network that was activated in August 2017. Its primary aim was to enhance scalability, improve transaction throughput, and fix longstanding technical limitations, particularly transaction malleability. SegWit achieves this by separating the “witness” data - the part of a transaction that contains digital signatures and scripts used to validate ownership - from the core transaction data. By moving the witness data into a separate structure, SegWit reduces the size of each transaction’s base data, allowing more transactions to be included in each block without formally increasing Bitcoin’s block size limit of 1 megabyte.

This structural change had multiple positive implications for the Bitcoin ecosystem. First, it allowed for more efficient use of block space, effectively boosting the network’s transaction capacity and lowering congestion during periods of high demand. Second, SegWit addressed a critical vulnerability known as transaction malleability, which previously allowed small modifications to unconfirmed transactions. By resolving this, SegWit enabled the development of advanced second-layer solutions such as the Lightning Network, which rely on predictable and immutable transaction IDs to operate securely off-chain.

In addition to supporting scalability and enhanced functionality, SegWit also reduces network fees for users who adopt compatible wallets and addresses. Transactions using SegWit formats (such as Bech32) are generally smaller in size, leading to lower costs since fees are calculated based on data size. As of today, SegWit has seen widespread adoption across major exchanges, wallet providers, and payment processors in the Bitcoin ecosystem, and it continues to serve as a foundational upgrade enabling broader efficiency and innovation within the protocol.