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Blockchain Scaling 101: Segregated Witness

Dec 10, 2019 | Cognition, Scaling

One often-heard criticism regarding cryptocurrencies is how they cannot scale properly. While that is true, several solutions are in place. Segregated Witness is one of those projects that paves the way for better scalability. 

The Problem to Solve

When looking at Bitcoin or most other top cryptocurrencies, there are certain limitations in place. This applies to both the amount of data to be processed through one network block, as well as the amount it takes the network to confirm a new dataset has been introduced. 

As both of these problems combine into very problematic scenarios, it has become evident that something needs to change. The Bitcoin network tries to solve this problem by using a solution known as Segregated Witness, or SegWit.  Overcoming the network’s block size limit can be done in many different ways, after all.

Rather than increasing the network’s block size limit beyond 1MB per block, SegWit does something else entirely. It introduces optional data transmission and effectively bypasses the block size limit in doing so. Every network block considered transactions and the signatures approving every transfer of value. 

Segregated Witness to the Rescue

The bread and butter of Segregated Witness is how it alters the signature data in every network block. More specifically, this information is separated from the Merkle tree record of the associated transaction. 

By moving the signature data to the end, the “size” of this information is counted differently by the network. Rather than using one unit, it requires one quarter of a unit. 

The second benefit to SegWit is how it rectifies any signature malleability concerns. By serializing signatures from the transaction data, the transaction IDs in the block are no longer malleable. 

This approach will not matter much to using the traditional Bitcoin network. When it comes to other layering solutions, such as the Lightning Network, this approach can become worth its weight in gold. 

Progress to Date

The activation of Segregated Witness on the Bitcoin network took place in August of 2017. It was agreed upon by miners and the majority of network service providers to follow this path. Not everyone in the Bitcoin ecosystem saw this as a solution to the scaling problem. Eventually, they created an alternative version of Bitcoin, known as Bitcoin Cash. 

Since the activation of SegWit, steady progress has been made. The consensus layer and peer services were introduced on the same day. However, the overall percentage of network transactions utilizing this new standard is far from perfect. According to statistics by TransactionFee, roughly 55% of all Bitcoin transfers make use of SegWit at this time. 

Further improving upon this number will be a challenge. While most service providers and wallets actively support SegWit, it appears the figures aren’t rising quickly enough. A lot has happened since late 2017, yet just under half of the network transfers still do not adhere to this standard. 

Images courtesy of their respective sources.

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<a href="https://fintoism.com/author/oglock/" target="_self">JP Buntinx</a>

JP Buntinx

JP Buntinx is passionate about cryptocurrencies, fintech, blockchain, and finance. He currently resides in Belgium.

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