Segregated Witness or often abbreviated as SegWit is an update (Hard Fork) proposed for the Bitcoin software, which is designed to fix various serious problems. Maybe SegWit is the biggest Bitcoin protocol upgrade to date, where several improvements are wrapped together.
SegWit is an update to the Bitcoin Core system which is intended to overcome the problem of block size restrictions which reduce the speed of Bitcoin transactions. This is done by dividing the transaction into two segments, removing the initial Signature from the original part and adding it as a separate structure in the end. The original part will continue to store the data of the sender and receiver, while the new “Witness (Signature) structure” will contain scripts and digital signatures that are useful for transaction validation. As the most important improvement, SegWit eliminates transaction flexibility. Before SegWit, the oddities about Bitcoin cryptographic signatures made it such that transactions can be changed to “look” different, even by people who haven’t made the transaction themselves.
What are the benefits of Segregated Witness (SegWit)?
As an added bonus, SegWit also offers an increase in the simple block size limit to a theoretical four megabytes, or a more realistic two megabyte limit, depending on the type of transaction included in the block. (Exactly: The block size limit was replaced with a four million unit weight limit, which introduced a new way to “calculate” transaction data.) This means that users with SegWit-supporting wallets pay lower transaction fees. SegWit is done by increasing the Bitcoin block size limit and allowing the application of a second tier solution. That is, in addition to separating Witness as described above, this Hard Fork will also increase the block size on Bitcoin Core which was previously only 1 MB. SegWit was officially activated on the Bitcoin network on August 23, 2017 in block 481,822.
However, the update carried out turned out to be only a separation of digital signatures, not followed by additional block sizes as predicted.
Then, after SegWit was judged “failed” as a solution to the problem of scalability that was getting worse, the developers finally agreed to plan an update again by doing a SegWit2x Hard Fork (SegWit2MB). SegWit2x is the next step that will be taken to solve the existing scalability problem. This is the second part of the NYA (New York Agreement) agreement made on 23 May 2017. The SegWit2x update will increase the Bitcoin block to 2MB.