What is Bitcoin SegWit – Segregated Witness

When you think of cryptocurrency and data storage you may end up finding yourself feeling a bit confused. After all, how many cryptocurrency newcomers understand what a block is or how transactions between nodes and masternodes even works? Don’t worry, many people who are new to cryptocurrency or coding in general often get confused too.

While some people may see cryptocurrency as a fad that should fade, others see this new technology as a future way of conducting transactions and other business ventures. But how do these cryptocurrencies retain their value when they are subjected to security breaches and other bugs in their codes or systems?

Simple, they do what any other website, online game, and other technological systems do – they update and upgrade protocols and add patches. In the digital age where private personal information has become even more valuable, it is actually expected of any tech company to invest in their security systems and computer programs. Failure to do so would bring about dire consequences.

After all, this is why many social media users transitioned away from Myspace to Facebook and later on towards social media applications. Security of private information has become a hot-button issue, especially with all the current infringements as of lately.

How does security issue relate to cryptocurrency? Cryptocurrency started off on the basis of providing users a secure alternative to the current corrupt financial institutions and unpredictable stock markets. Users could instead take part in a digital system and thus build a trustless society that operates on the nature of verifying all transactions.

Bitcoin and many other top cryptocurrencies have felt the heat of many breaches due to internal flaws in the cryptocurrency’s programming. One flaw was transaction malleability. So how did Bitcoin fix this?

SegWit: A Solution to Bitcoin and Litecoin’s Block Size Woes and More

SegWit (Segregated Witness) is a newly updated protocol for Bitcoin and other altcoins such as Litecoin. The developer of SegWit set to fix one of Bitcoin’s major code malfunctions. That bug was the transaction malleability of Bitcoin.

Basically, before SegWit was introduced, some users were stealing Bitcoins by altering small bits of transaction data on the block. These tiny transaction alterations made it possible for thieve to take any cryptocurrency without being caught. These little alterations were made in the block’s transaction ID which would mean the hacker was changing where the bitcoin was being sent.

This, in turn, made Bitcoin vulnerable and unable to make further security measures such as smart contracts and second-layer protocols.

How did Bitcoin not notice these minor data infringements sooner? Well, the reason Bitcoin didn’t pick up immediately on the problem, was because of the way in which Bitcoin transactions work. While it was a big issue among users, it wasn’t a huge issue to Bitcoin as a whole since the hackers didn’t add any cryptocurrency into the system, they simply stole cryptocurrency from other users.

Bitcoin’s cryptocurrency pool remained the same and no inflation occurred. So to the developers of Bitcoin, it didn’t really become an issue for the platform. It did become an issue when they needed to progress the cryptocurrency’s payment system to handle higher volumes of payment transactions.

Breaking Down the Basics of Cryptocurrency Data Protocols on Bitcoin

All Bitcoin transactions are kept on nodes. These nodes are every single person’s computer that chooses to take part in the Bitcoin mining process. All nodes have a full record of every single Bitcoin transaction that has ever occurred. This record is what you would call a blockchain otherwise known as a coin’s digital ledger.

Users who take part in the Bitcoin mining process are called miners and they are the ones who receive your transaction fees. Miners simply take your transaction data and apply that data onto a block, this block is where your financial record of cryptocurrency exchange is kept.

This transaction information amounts to about 1 Mb of data and approximately 3-7 transactions are processed per second depending on how busy the network is.

This is why transactions on Bitcoin take time since someone out there in the cyber world is manually processing your transaction. This method of processing transactions is what one can call a double-edged sword. While it is great for those who want a completely decentralized, transparent, and trustless network, it also opens many doors for potential hackers and crypto thieves.

How Does SegWit Work?

SegWit works by removing the signature information. This would allow more flexibility in changing the signatures and scripts without changing the transaction id. How this is done is by storing the signature information outside of the base transaction block. While keeping the transaction data at 1 Mb, all other data is placed on a side-chain alongside the transaction block.

This, in essence, would make it harder for hackers to alter the transaction id and thus make it next to impossible for them to steal Bitcoins from other users. Basically, it keeps all transactions honest and secure and prevents scammers from taking more Bitcoin via altered Bitcoin transactions.

How it combated this error was by instilling a soft fork in the system. This means the information in the transaction data is sent from one node to another without requiring both nodes to be updated. This new protocol patch thus made Bitcoin backwards compatible.

Before SegWit, Bitcoin was suffering from hard fork problems. Hard forks require all nodes in the transaction to have the same update on information before transactions are sent. This opens the network to being divided and thus new cryptocurrencies are added/created.

So while miners and the senders are under the pretense of one transaction, the dishonest users get more currency by altering the transaction and making it send twice.

How Does SegWit affect Bitcoin and Litecoin?

SegWit simply patches up the code errors and bugs within each cryptocurrency’s transaction protocols. Since both utilized similar protocols it is no surprise that both faced the same issues. Litecoin adopted the SegWit protocol before Bitcoin did, and it has shown to have benefited the cryptocurrencies in many ways.

By making the data harder to alter it results in a way more secure transaction and makes it harder for dishonest users to fool the system. SegWit acts as the nice digital check and balance to an otherwise decentralized cryptocurrency.

Segwit has also been intertwined with another protocol update called Lightning Network which has allowed these cryptocurrencies to finally make progress in other projects.

Final Thoughts on SegWit (Segregated Witness)



Is SegWit really the fix Bitcoin needs? Depends on who you ask. While many users of Bitcoin are grateful for this new protocol patch others seem to have felt it wasn’t enough. This alone has led to some users splitting off from Bitcoin and creating their own altcoins.

For the most part, this new protocol has not only solved the transaction malleability issue, it has also allowed Bitcoin have the ability to process more transactions. This new ability allows Bitcoin to grow as a successful alternative to fiat currency and various payment systems.

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