What is Segwit (Segregated Witness)?
Crypto Glossary Definition
An upgrade to the Bitcoin protocol where signature data is removed from transactions, allowing more transactions to fit in a single block, increasing the speed of the network.
Why Segwit (Segregated Witness) Matters
SegWit was a 2017 Bitcoin protocol upgrade that restructured how transaction data is stored, effectively increasing block capacity and fixing a technical issue that had been blocking further scaling upgrades like the Lightning Network.
Segwit (Segregated Witness) in Practice
Before 2017, a Bitcoin transaction stored its unlocking signature data directly inside the transaction itself, which meant that a portion of every block's limited capacity was consumed by data that didn't actually need to sit alongside the transaction amounts and addresses forever. Developers proposed Segregated Witness as a solution: separate, or 'segregate,' that signature data from the core transaction data, storing it in an extended block structure instead. Because signature data typically made up a large share of a transaction's total size, this restructuring effectively let more transactions fit into the same block size limit, easing network congestion and lowering average fees once wallets and exchanges adopted it. Segwit activated on the Bitcoin network in 2017 after a contentious, multi-year debate within the community about the best way to scale the network, and it also fixed a technical bug called transaction malleability that had been blocking the development of second-layer scaling solutions like the Lightning Network, since Lightning depends on being able to reference unconfirmed transactions reliably. Wallets that generate Segwit-formatted addresses, recognizable by their 'bc1' prefix, generally offer lower transaction fees than older address formats, which is why most modern Bitcoin wallets default to Segwit addresses today.
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