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SegWit (Segregated Witness)

11/04/2018 00:00
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SegWit in simple words: how and why do we need to update Bitcoin's protocol

The main characteristic of Bitcoin is its "solvency". In fact, it is possible to use cryptocurrencies as a reliable payment method, and this fact is being mentioned in every article devoted to the essence and popularization of cryptocurrencies. And, the convenience is quite justified: indeed, with every day there are more and more goods and services for which cryptocurrencies can be paid for. More people and states recognize this method of payment as convenient and legal one.

Nevertheless, even for such an innovative invention as the cryptocurrencies, there can be exceptions. In case of Bitcoin, such exception supposes the speed of transactions (which was desired to be better). For example, you can compare the cryptocurrencies with the usual payment system like MasterCard or Visa: when a person makes a payment using a credit card (of one of these systems), the transaction happens just in the moment - in fact, Visa processes up to 1000 transactions per second. Unlike these systems, the Bitcoin network is capable of processing only 3 operations per second, which significantly slows down the processing time of each single payment.

Such a "defect" of Bitcoin system appeared due to the structure of transactions and blocks in the blockchain. The popularity of cryptocurrencies continued to grow, but the delays of the system's work were the nail in the coffin of either users or developers. As a result, the latter began to look for a solution to this problem, which became SegWit. The essence of it was to optimize the blocking and transactions, with the subsequent increase in network bandwidth. An additional advantage of the method was the lack of the need to conduct hardfork (that is, change the chain of blocks).

What does SegWit mean?

SegWit is the abbreviated meaning of the concept of Segregated Witness. In simple words, this is a way to improve Bitcoin, in which the standard block size remains the same, but all new information is allocated to a new, additional block. Even a network node that does not support SegWit can "see" such a unit and conduct operations with it.

In fact, this is a special code, which can be activated according to the BIP9 standards. In simple words, when for the period of 2016 blocks (approximately 2 weeks of work) 95% of them will support SegWit, then anyone who wants to update the software will be able to do it. If that happens, the possibilities of the cryptocurrency will be virtually unlimited.

How it works: the improvement that SegWit gives

In order to better understanding the principles of SegWit, it is useful to consider the standard structure of transactions in the Bitcoin network.

The standard Bitcoin transaction consists of two main parts:

  1. All the main information about who sends, to whom, and also how much (amount in "Bitcoins").
  2. Information "witness" – a special cryptographic code-signature. Such a code is a confirmation of the fact that a certain participant made his money transfer (transaction).

The part of the "witness" was problematic for the Bitcoin network, because formally, such a signature can only be changed only when it has already been written to the block. At the same time, Bitcoins will still be transferred from one participant to another, but all new transactions that follow will become heavier, because, in fact, the block is a chain of blocks. Each new unconfirmed transaction block will slow the processing speed of new transactions that "pull out" information from previous transactions.

Thus, Bitcoin's current protocol has been constantly creating the problems with the speed of translations. At the same time, it was extremely ambitious to introduce any large-scale changes in the protocol itself. This problem was called the "error of transactional plasticity", so SegWit began.

What problems SegWit helps to solve

The very invention of SegWit was innovative for Bitcoin's protocol, which network was constantly growing, and the question of scalability was key, and required an immediate solution. Accordingly, the introduction of new function helped to solve not only the main problems of the network, but also some important work tasks, among which:

  1. "Compressing" the transaction size to 48% (on average). Thus, twice as many transactions can physically fit into one block. In this case, the block size remains the same – 1 MB.
  2. Removing the signature with Witness information data from the block, which helps to increase its size and significantly increase the bandwidth of the entire network as a whole.
  3. With the introduction of SegWit it will take less time to synchronize and start the node.
  4. The process of checking the status of the operation itself will be simplified.
  5. It will be possible to reduce the overall size of the block, which, in turn, will save disk space for new full nodes.
  6. The blockchain itself can be connected to various second-level protocols, such as, the Lightning Network. In future, it will also be possible to implement crosschain transactions.
  7. It is possible to strengthen the all-kinds-of-spam-attacks protection mechanism.
  8. With SegWit, it becomes possible to exchange cryptocurrencies for fiat money without exchangers or any exchange services.

The beginning of SegWit

The idea of Bitcoin's protocol was first introduced in 2012. Then Bitcoin-Core developers such as Luc Dashir, Russell O’Connor and Gregory Maxwell began talking about finding ways to correct the error.

Two years later, in August 2014, Gregory Maxwell, along with the cryptographers Peter Vuile and Adam Beck launched a company called Blockstream, with main purpose was to study the blockchain. Blockstream helped to find the solution of the problem with the "witness" by separation of the information from the main part and the data. A freshly invented function was called Segregated Witness.

Stages of SegWit development

End of 2015        SegWit's team did not know exactly which methods to upgrade the network they will use, so they did not have to use hardfork. Parallel with this, two conferences were held in Montreal and Hong Kong, the main theme was the scalability of bitcoin. Between these two conferences the developers came up with the idea how to conduct SegWit without hardfork. At the second conference (in Hong Kong), the company presented SegWit. In addition, they also presented a special code BIP141.

October 2015    SegWit was introduced in Bitcoin Core 0. 13. 1. The support of 95% of the miners was needed for activation.

April 2017            This proposal has been developed under the name UASF. This proposal has made the activation of SegWit possible with the support of 95% of nodes, not miners. UASF was not able to accept all the developers of Bitcoin Core. Therefore the improvement of the BIP149 was additionally developed.

May 2017            Final meeting in New York and signing of the New York Agreement.

What are the advantages of SegWit?

  • SegWit implementation will facilitate the development of new smart contracts (for example, those used in the Lightning Network, which is made possible by eliminating the change in the signing of transactions from a third party).
  • The size of the transaction itself can be reduced, while the amount of data in it does not change. This option became possible by moving the data signature.
  • After the introduction of SegWit, it becomes possible to reduce commission fees.
  • Network transactions can be carried out by those participants who agreed to "accept" the update, as well as those who did not do it. At the same time, those who still accepted the protocol will be able to perform their work with much smaller commissions.
  • With the upgrade of SegWit, it will be easier to implement new softforks. Thus, for example, it is possible to implement fresh ideas for improving safety.
  • The working function Signash becomes linear (not exponential, as before). This will make transactions more secure, and also have a positive effect on the speed of validation of the blocks.

The world of cryptocurrency is constantly developing and brings something new, so stay with us and remember to subscribe to our pages in FacebookTelegram  news feed channel and YouTube  channel to stay in touch about all updates of cryptocurrency world!


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