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 that increased Bitcoin's effective transaction capacity by replacing the 1MB block size limit with a 4 million weight unit (4 MWU) block weight system. By reorganizing how transaction data is stored, SegWit created space for more transactions per block, increasing throughput. It also fixed transaction malleability, a technical issue that was preventing Lightning Network. SegWit adoption was contentious—some miners and developers opposed it, leading to a hard fork that created Bitcoin Cash. However, SegWit was ultimately adopted and is now the standard. SegWit also reduced transaction fees significantly because witness data (signatures) counted at 1/4 weight instead of full weight. Understanding SegWit shows how Bitcoin upgrades happen through community consensus and debate.
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, reducing the byte count of the main transaction data. Because the block size limit was applied to the main data (now called "block weight"), this effectively allows more transaction data per block without changing the stated 1MB limit. A SegWit transaction is smaller in byte size than its legacy equivalent, fitting more transactions in each block. Addresses starting with "bc1" are the SegWit bech32 format.