SegWit is the compressed term for “Segregated Witnesses“. Now, getting down to the etymological definition —
• Segregate means to differentiate, or separate.
• Witness refers to the transaction signature.
Therefore, Segregated Witness means the separation or the differentiation of various transaction signatures.
What SegWit means…
According to Investopedia, SegWit can be technically defined as,
…the process by which the block size limit on a blockchain is increased by removing signature data from Bitcoin transactions.”SegWit, from Investopedia
Removal of some portions of a particular transaction information frees up space, hence increasing the capacity of the blockchain to store more such data in it.
Who created the SegWit idea?
This concept was brought forth by Pieter Wuille, a Bitcoin developer.
Let’s elaborate a bit more…
The bitcoin blockchain constitutes many systems, or nodes, scattered across a peer-to-peer or P2P network. These nodes function in administrating Bitcoin transactions in their network. Duplicates of all transactions, that are made in the Bitcoin currency, are shared across these nodes. This makes cyberattacks on the nodes or even distortion of transaction information an impossible and absurd task to accomplish.
Now, let us focus on the transaction data. This particular data, shared among all nodes, consists of two components – inputs and outputs. There are no designated limits on the number of inputs and outputs to be present in a transaction. Proceeding the explanation with the following definitions —
(1) The output is the public address of the individual who is supposed to receive the transaction
(2) The input is the public address of the one who is supposed to conduct the same transaction
Now, the sender requires the recipient’s public address so that he can transfer funds accordingly. The maximum space in a transaction datum consists of a signature (a part of the input), verifying that the sender has the necessary amount of funds to conduct the transfer. So, Bitcoin travels from the inputs to outputs for each payment undertaken. Once each of the nodes validate the transaction as being authentic, the transaction is included in a block of the same blockchain, as a virtually distributed ledger in the public domain.
Wait. How is SegWit relevant to this?
An unavoidable glitch entails this utopian procedure of virtual funds transfer. A blockchain on the Bitcoin platform faces a serious problem – the gradual depletion of virtual space. With transactions being conducted every now and then, more blocks are added to the chain for the sake of data storage. In fact, blocks are created in every 10 minutes and are limited to 1 megabyte (MB) of size. This limitation merely allows the storage of a few amount of transactions in every block. So, the increasing number of the transactions lead to an increasing number of block formations, which in turn results in bogging down the network. And, the heavier the network, the more delays are caused in conducting and validating transactions. Sometimes, it may also take hours to confirm a transaction to be genuine. To think of a particular Blockchain still piling up all Bitcoin transactions that have been carried out since it emerged in 2009; now, that is not a pleasant thought. It was high time that something radical turned up on the chain.
Enter Pieter Wuille
Dr. Pieter Wuille recommended the segregation of digital signatures from transaction data in order to resolve this issue. This is the idea of Segregated Witness or SegWit. Since a digital signature occupies around 65% of the space in a given transaction, SegWit strips the signature off from the input and shifts it to a virtual portion towards the end of the same transaction. This expands the 1 MB size limit for blocks to around 4 MB. Besides, SegWit averts the issue of the recipient’s ability to modify the sender’s transaction ID so that the former can receive more funds from the latter. The removal of the signature from the inputs leaves no room for dubious and unscrupulous entities to alter transaction IDs and tacitly extort more money.
To be precise, SegWit is a firewall to the most secured crytofinancial technology. Sounds cool, doesn’t it?