What is SegWit, SegWit2x, UASF??? Here it is explained!!!

With SegWit, Segwit2x and UASF many terms are in the debate about Bitcoin after the first August - what these terms signify and what effects they have on Bitcoin and the users is explained in this post.

Those who have followed the debates around Bitcoin as well as the course developments over the past few weeks will often have encountered different terms. A lot has been written about whether a price increase or a price decline is to be expected in the context of what is to be done with the money invested in Bitcoin. But the question of what is to be understood concretely under these terms comes somewhat briefly. Therefore, I would like to clarify to you in this post the most important terms.

The scaling debate should be familiar to everyone: With the growing interest in Bitcoin, the number of transactions increases. In order to make these transactions irreversible, thus providing a guarantee for the sender and the payment recipient, this transaction must be inserted into a block and integrated into the blockchain.

The maximum size of these blocks is limited to 1 MB. According to Gavin Andersen, a transaction is about 250 bytes, which means that 4,000 transactions can be integrated in each block.

Since the Blockchain is added a new block every 10 minutes, Bitcoin can process an average of 7 transactions per second. This is not enough for a worldwide payment network.

Why is not the block size increased? Many larger mining pools have no problem with this. One concern expressed in the context of the block size debate is that this increase in block size would be accompanied by a hard fork. The clients used by the nodes and miners would have to be updated. If a significant number of nodes do not, this would lead to a chain split, there would be two versions of Bitcoin.

Increasing the block size will also endanger decentralization: the operating costs of nodes will increase so that not everyone can afford to do so. The number of nodes is already decreasing, a trend that could be accelerated by such developments. The danger of a hard fork and a declining decentralization is for many a too big price for a few transactions more.

One can say somewhat paraphrasing that the scaling problem also has one thing: even an increase in the block size by a factor of two would mean in the end only 14 transactions per second can be processed. A look at transaction rates in global networks like VISA shows that this would be much too slow. Accordingly, further proposals for solutions were developed, of which Segregated Witness is, along with its variations, the best known.

About Segregated Witness or SegWit has already been written. My post should be a bit technical details and explain the background to Segregated Witness.

Segregated Witness to reduce a solution to the scaling problem would fall short. SegWit is a data structure, which supplements Bitcoin's previous system: each block is provided with a "Witness" beside the Merkle Tree formed by the transactions. This contains all data that can be used to verify the validity of a transaction, but not the effects of a transaction. The Witness can now be used to describe transactions with two transaction IDs: one known and also previously used, and one that contains further data.

Why is there such an effort? On the hand, the size of the witness data can be partly ignored in the calculation of the block size, which effectively increases the number of transactions which can be stored in a block. A block size increase without increasing the block size, so to speak.

By efficiently processing individual transactions, large transactions, which occur, for example, in the context of mining rewards or Crowdfundings, are processed more quickly.

Another important advantage is that unconfirmed transactions can be used without any worries. This is not just the security of the network, but also paves the way for the Lightning Network, a way to transfer off-chain transactions to counterfeit security. It also increases the confidence in a transaction that has been executed, so waiting for multiple confirmations is no longer necessary, thanks to Segregated Witness.

Finally, SegWit allows an extension of Script, the script language of Bitcoin, without requiring a Hard Fork. Although simple extensions have been possible up to now, ten new OP_NOP codes have been provided with new functions, but more complex extensions could not be implemented. Since the script version number is now specified under the Witness protocol, these can be quickly corrected by updating the script version. This is an extremely exciting development because the relatively simple expansion of the Bitcoin protocol makes it possible to open the way for Smart Contracts or side-chains.

It can be seen that Segregated Witness can be much more than a response to the scaling debate, which is why the Miner supports a SegWit supporting proposal. If you want to go deeper into the subject, you should refer to the Bitcoin Improvement Proposal BIP141 as well as a description of the advantages of SegWit from Bitcoin Core Team.

BIP141 https://github.com/bitcoin/bips/blob/master/bip-0141.mediawiki
SegWit from Bitcoin Core Team https://bitcoincore.org/en/2016/01/26/segwit-benefits/

SegWit2x is a combination of Bitcoin Improvement Proposals BIP141, BIP102. BIP141 describes Segregated Witness and was discussed in the previous article. With BIP102, Jeff Garzik suggested increasing the block size from 1MB to 2MB. This proposal itself was a compromise if BIP100 and BIP101 were not recognized. These Bitcoin Improvement Proposals are more radical ideas on increasing the block size: BIP100 had a dynamic limit, BIP101 an 8MB limit in mind.

BIP102 https://github.com/bitcoin/bips/blob/master/bip-0102.mediawiki

The pure increase of the block size limit was never much in the core developers, so BIP102 was never integrated into Bitcoin Core. In the New York Agreement, SegWit2x became a combination of Segregated Witness and increased block size.

The hope is that this combination will create the scaling problem out of the world and the Miners as important stakeholders will also be given greater consideration. However, a combination that only BIP141 and BIP102 would consider ending in an abrupt hard-ended - which no one would like. The SegWit2x approach is therefore to introduce the block size only towards the end of the year, specifically 144 * 90 blocks after the introduction of Segregated Witness. So you can gain first experience with Segregated Witness.

SegWit2x is now more than just a suggestion for improvement. In the New York Agreement, well-known companies have committed themselves to the implementation of SegWit2x. A new Bitcoin client was also written based on Bitcoin Core Client 0.14. This version can, in principle, be combined with the main branch defined by Bitcoin Core.

However, whether this is wanted is another question: different supporters of SegWit2x would like to take advantage of the possibility to get the governance out of the hands of the core team.

What has hitherto been hidden in the discussion of the Improvement Proposals is the question: How does it actually come to a consensus? Of course, everyone can make their views heard in different forums, but these are utterances beyond the bitcoin Blockchain.

Nodes can upgrade the software, but is there another way for Miner to voice their position within the Bitcoin network? There are different approaches to the implementation of so-called soft- One of which has also been implemented is BIP9. This proposal regulates how Miner expresses its opinion. For more detailed technical details, please refer to Bitcoin Improvement Proposal.

Bitcoin Improvement Proposal https://github.com/bitcoin/bips/blob/master/bip-0009.mediawiki

According to the protocol, a soft fork according to BIP9 is not activated unless 95% of the miners have expressed their agreement to this change. Now the problem is that this is the decision to further develop Bitcoin into the hands of large mining pools. Miners can thus slow down any further development. This is especially annoying when different stakeholders, such as the developers, wallet manufacturers, exchanges, node hosts, and many users, are themselves a particular innovation.

One problem is also the explicit requirement of consent. If something more than 5% of the miners are not even against the new soft fork, but simply idle and do not signal their approval according to BIP9, no proposal can be accepted.

This was also the concern of various Segregated Witness supporters. Segregated Witness will reduce the need for transaction confirmations through a virtual increase in block size as well as greater security for unconfirmed transactions, which would result in low readiness for high transaction fees. And so were not necessarily all miners segregated Witness enthusiastically.

A developer known under the pseudonym Shaolinfry saw an abuse of the governance described above. He has written two proposals with BIP148 and BIP149, the aim of which is to force the Miner to Segregated Witness - by a user-activated Soft Fork. Here the focus is on GDP148; BIP149 is an alternative.

A soft fork is a change to the Bitcoin protocol, which is downwards compatible. Nodes that do not perform the update remain part of the network. Segregated Witness is, in contrast to an increase of the block size, such a Soft Fork.

This soft fork is activated by a user who is activated at a specific, previously defined time. In the case of BIP148, this means that nodes that have installed a Bitcoin Core Client that supports BIP148 will accept blocks from miners that do not send Segregated Witness support. This would then lose these miners the corresponding reward.

The idea, therefore, is to create an incentive for Minern to speak out for Segregated Witness. Also, normal nodes that do not support BIP148 would ideally have the Miner for Segregated Witness and the Soft Fork would be activated. For further information refer to BIP148.

BIP148 https://github.com/bitcoin/bips/blob/master/bip-0148.mediawiki

This proposal can also involve some risks. Because of these risks were also among critics of Segregated Witness friends. Gregory Maxwell, the CTO of Blokstream and Suhas Daftuar, co-founder of Chain code Labs are Bitcoin core developers and see BIP148 as too disruptive.

In order to protect themselves against various problems at the beginning of August, either a sufficiently high degree of consent with respect to segregated Witness must be reached or a corresponding protocol already activated. This is where BIP91 comes into play. This Bitcoin Improvement Proposal is similar to BIP9 by one, which wants to regulate the consensus-finding. An important difference is that it requires only 80% approval and significantly fewer blocks between approval and activation of SegWit2x must be mined. If by the beginning of August BIP91 gets through, one will not have to be afraid of any complications of a User Activated Soft Fork. At the moment it looks like this - of the last 144 blocks, almost 90% spoke for BIP91.

BIP91 https://github.com/bitcoin/bips/blob/master/bip-0091.mediawiki

As far as the terms defining the last days. The current development makes it hoped that the situation around the first of August will now be safe. What does not mean, however, that everything in the Bitcoin ecosystem is in order - in November the 2x-part of the SegWit2x is implemented. And here it would need a hard fork!

I hope that all the information above will be useful for you.
If you have more information please leave it in the comments.

Lovely regards
@danyelk
👉