SegWit

SegWit, short for Segregated Witness, is the bitcoin protocol upgrade defined in BIP 141 that moved signatures and other unlocking data out of the portion of a transaction that determines its identifier. Activated on August 24, 2017 at block 481,824, it was deployed as a backward-compatible soft fork after one of the most contentious debates in bitcoin's history.

Why it matters

SegWit fixed transaction malleability, the flaw that let third parties change a transaction's ID before confirmation, which had blocked the safe construction of payment channels; the Lightning Network became practical because of it. It also expanded capacity by replacing the 1 megabyte block size limit with a 4 million weight unit limit, under which witness data is discounted, roughly doubling typical throughput. Its activation resolved a multi-year governance conflict in which users running inexpensive nodes, rather than large miners, proved decisive, an episode remembered as the block size war.

How it works

SegWit outputs commit to a witness program, and spends supply their signatures in a separate witness structure that old nodes never see, which is why legacy software continued validating blocks without disruption. New address formats followed, most visibly the bech32 addresses beginning with bc1q, and adoption climbed gradually until the large majority of transactions used SegWit inputs. The versioning scheme it introduced also created the upgrade path used by Taproot in 2021, making SegWit the structural foundation of bitcoin's modern script system.