What is SegWit (Segregated Witness)?
A major Bitcoin protocol upgrade activated in 2017 that changed how transaction data is stored. Increased capacity and fixed transaction malleability. Laid groundwork for Lightning Network.
Why It Matters
SegWit was a critical upgrade. It increased Bitcoin's effective transaction capacity by replacing the 1MB block size limit with a 4 million weight unit block weight system. By reorganizing how transaction data is stored, SegWit created space for more transactions per block. Higher throughput. It also fixed transaction malleability, a technical issue that was blocking the Lightning Network. SegWit adoption was contentious. Some miners opposed it. The disagreement led to a hard fork creating Bitcoin Cash. SegWit was ultimately adopted and is now the standard.
How It Works
SegWit separates transaction signature data (the "witness") from the main transaction data. In the original Bitcoin format, everything was stored together in a 1MB block. SegWit moves witness data to a separate section. The result: smaller main data per transaction. Because the block size limit applied to main data (now called "block weight"), this effectively expanded capacity without changing the stated 1MB limit that had been the subject of years of political fights. A SegWit transaction is smaller in byte size than its legacy equivalent, fitting more transactions per block. Addresses starting with "bc1" use the SegWit bech32 format.