Do you keep updating your computer programs once in a while? Why do you do that? To keep your computer programs up to date, right? The same happens with cryptocurrencies. Digital currencies need to be updated to enhance and improve their performance. Bugs or any other error or defect are fixed when you update your computer system.
When a cryptocurrency is updated, changes are made to its protocol. Protocols are a set of instructions and rules that guide virtual currencies about the way they work. So, when changes are made in the protocol of crypto, it enhances the working of the asset. SegWit was an update done to the protocol of Bitcoin during 2017. In this blog, we will learn about SegWit and what are its advantages and disadvantages.
What is SegWit(Segregated Witness)?
SegWit is short for Segregated Witness. Segregate means separating and Witness is the transaction signatures. In simple words, we can say that SegWit means separating transaction signatures. It was first introduced by Developer Pieter Wuille at a Bitcoin Conference in the year 2015. SegWit was suggested as a solution to an error in the network of Bitcoin and was implemented on 23rd August 2017 to upgrade Bitcoin’s protocol.
In the process of SegWit, the block size limit on a blockchain is developed by withdrawing signature data from the transactions of Bitcoin. When these certain portions of a transaction are taken out, free space is available which has the capacity of adding more transactions to the blockchain. SegWit solved the problem of Transaction Malleability and also fixed some other issues which did possible improvements in the bitcoin protocol.
Advantages of SegWit
Faster Bitcoin Transactions-
The process of SegWit helps in making the Bitcoin blockchain lighter. When the chain becomes light, it allows processing of more transactions with increased speed and without increasing the size of the overall Bitcoin blockchain.
Cheaper Bitcoin Transactions-
When the speed of Bitcoin transactions increase, it will result in decreasing the transaction fees. Bitcoin transactions are charges a hefty fee but higher transaction speed will lower the transaction fees.
In simple words, transaction malleability means that users might steal Bitcoin by changing small bits of transaction information. But with SegWit, all these problems can be solved in a simple and creative way in the Bitcoin protocol.
New Possible Developments-
When Bitcoin serves a network of millions of people, it also needs to provide a solution to the scalability issue. Here, SegWit turns scalability projects, such as the lightning network, into a reality.
Disadvantages of SegWit
Short-term Solution to Long-Term Problems-
Some developers of Bitcoin say that SegWit is not successful for the long term in solving the issue of scalability. They suggest that some major changes in the blockchain size of Bitcoin and processing way of transactions will help the platform to scale in the future.
Not Being Used by Enough Nodes-
Many miners are not liking SegWit as the lower transaction fees affect their profits. Together with this, they also don’t like supporting a witness-data sidechain which doesn’t yield any profit at all. Bitcoin wallets also don’t support the changes of SegWit. After its six months of implementation, only 14% of transactions in Bitcoin was made using SegWit Bitcoin. Although its use has increased since then, the network will still take a long time to be completely updated.
Resulted in Divisions within Bitcoin Community-
Many members of the large bitcoin community are not in favor of SegWit. These disagreements and dislike of SegWit has resulted in many hard forks. A very famous fork among all these is BCH (Bitcoin Cash).
In conclusion, we can say that SegWit is a basic change that will surely allow many advances and developments in the future. Increase in adoption of SegWit will make it a standard for any transaction in Bitcoin. Segregating the witness from the block of transaction has many benefits like lower transaction size, fixing transaction malleability, etc. While some see it as a positive change for the network, some say that it is a limitation to Bitcoin.