SegWit turns years old: the protocol that made Bitcoin faster and more secure

Segregated Witness, also known as SegWit, revolutionized the Bitcoin network by improving its speed, scalability, and security. Today, eight years after its activation, we review why it was a crucial milestone in the evolution of the leading cryptocurrency.

August 23, 2017 marked a before and after in the history of Bitcoin with the activation of Segregated Witness, followedThis technical upgrade, designed to improve the network's efficiency and security, marked a quantum leap in the way Bitcoin processes and records transactions. 

More than just a tweak, SegWit corrected fundamental problems and paved the way for innovations that continue to shape the crypto ecosystem today. 

In this article, we'll review what SegWit is, why it was essential, and the substantial impact it has had on institutional adoption and the development of second-layer technologies that underpin the global Bitcoin-based financial infrastructure.

What is SegWit and what problem did it come to solve?

To understand SegWit, we must first look at the context in which it was proposed. From its inception, Bitcoin carried a strict limit of block size set to 1 MB, a parameter that, while ensuring decentralization, created a bottleneck as usage increased. 

Many users began experiencing delays, high fees, and the network becoming relatively overloaded. Faced with this reality, the technical community proposed various alternatives, including increasing the block size, but this approach generated divisions due to its impact on decentralization.

SegWit, proposed by developers Pieter Wuille, Eric Lombrozo y Johnson lau in 2015, and finally activated in 2017 through a soft fork, was presented as an ingenious and compatible solution to improve Bitcoin's scalability without altering its security or requiring a hard fork.

The technical key to SegWit lies in separate digital signatures (called “witnesses”) from the main transaction information. These signatures, which validate the authenticity of each transaction, occupy a significant portion of the space of each transaction.segregate them” and moving them to a separate data structure optimizes the use of space within blocks on the network.

Although the nominal block size limit in Bitcoin remains at 1 MB, SegWit introduces a new concept called block weight, which allows for a effective capacity up to 4 MB. Therefore, this innovation improved efficiency, reduced transaction costs and laid the groundwork for second-layer solutions such as Lightning Network.

In addition, SegWit gave rise to new Bitcoin address formats, such as those beginning with “bc1” (Bech32) and “3” (P2SH), facilitating a gradual transition compatible with legacy systems.

But perhaps, the technical contribution more crucial was how SegWit solved the transaction malleability problemBefore SegWit, the digital signature could be altered without invalidating a transaction, creating uncertainties about payment identification and complicating future developments. 

This malleability was a barrier to second-layer protocols, such as Lightning Network, designed to make transactions instant and low-cost outside the main blockchain. By eliminating this vulnerability, SegWit laid the groundwork for a more robust and versatile technological and financial evolution.

SegWit transformed Bitcoin into a more reliable financial infrastructure.

Beyond the technical improvement in processing capacity, SegWit brought with it a tangible reinforcement in the security of the Bitcoin networkBy modifying how digital signatures are stored and validated, certain types of attacks that exploit malleability were made more difficult, making transactions more resistant to external manipulation. This increase in trust has been vital to acceptance among institutional actors.

From global exchanges to large payment processors, the implementation of SegWit has been welcomed for its practical benefits. Financial firms particularly value how it reduces operational costs and enables more efficient management of transaction volume. Support for advanced solutions, such as wallets using SegWit addresses, represented by the prefix bc1, allows many institutions to optimize their operations with lower latency and greater security.

SegWit adoption wasn't immediate, but rather a gradual process, fraught with technical challenges and debate within the community. It required many users to update their software and reach a consensus on its implementation. However, over time, its use has become widespread in highly active cryptocurrency markets, reaching significant transaction percentages and demonstrating that this improvement was not only technically necessary but also feasible and valuable in practice.

In short, this institutional advancement also indicates how Bitcoin is consolidating as a financial infrastructure that transcends merely "technical" users or speculators. SegWit has made the network more user-friendly for those seeking integration with traditional systems, providing greater confidence in the cryptocurrency's stability and ability to handle large-scale operations.

A foundation for the future development of Bitcoin

Beyond the immediate impact of its activation, SegWit was a pillar for subsequent innovations that continue to expand Bitcoin's technological horizon. These include the development of tap root y Lightning Network, two advancements that have gained prominence in recent years. Taproot, for example, has boosted the privacy and efficiency of complex transactions by leveraging the structure and concepts introduced by SegWit.

The Lightning Network, for its part, is a solution that enables instant micropayments with virtually zero fees, operating off-chain and delegating final verification to the main blockchain. Without the malleability fix implemented by SegWit, the Lightning Network could not have been deployed reliably. This has opened the door to use cases that were initially unimaginable on Bitcoin, such as microtransactions for digital services, IoT (Internet of Things) payments, and new forms of economic interaction.

In addition, SegWit accelerated the adoption of “bech32” addresses, also known as bc1 addresses, which improve storage and validation efficiency, reduce commission costs, and are more user- and application-friendly. This transition has been critical to maintaining the protocol's relevance in the face of network growth and competition with other cryptocurrencies.

Ultimately, SegWit wasn't just a temporary improvement, but the gateway to Bitcoin's ongoing modernization. It's an example of how technical innovation can coexist with stability and preserve the decentralized spirit that characterized the original network. Its anniversary reminds us that Bitcoin can adapt without breaking with its foundations, allowing a technology that's more than ten years old to remain relevant and constantly evolving.

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8 years of SegWit: efficiency, traceability, and institutional trust

Eight years after its activation, SegWit stands out not only for its technical benefits, but also for what it meant for the Bitcoin community in terms of governance, collaboration, and long-term vision. The protocol demonstrated the ecosystem's ability to implement significant changes through consensus, with a solution that respected compatibility and avoided disruptive fractures.

SegWit is a lesson in how complex problems can be addressed through a careful and collaborative engineering approach, where every detail impacts the robustness of the network. The solution to malleability and the optimization of block space usage exemplify how a technical improvement can trigger a cascade of innovations and increased adoption.

For the community, SegWit is also a symbol of conscious evolutionBy keeping the network sustainable and scalable, it allowed Bitcoin to avoid stagnation and maintain its relevance as demand grows. It also laid the groundwork for the development of solutions that protect the network's decentralized nature, minimizing the push for centralized options that compromise financial sovereignty.

This anniversary invites us to appreciate the importance of “silent” but fundamental improvements, those that don’t grab headlines, but are the true engine of progress. SegWit is a reminder that behind every fast and cheap transaction there is engineering work that ensures Bitcoin remains a viable and reliable infrastructure in the global digital economy.