Bitcoin fork: Decoding 'Segwit' for Newbies
In this post, I will be talking about 'Segwit' a term you might have heard bouncing around in the cryptocurrency market. I have tried to make the explanation simple to understand and not very technical.
Segwit is the shorter form of 'Segregated Witness'. It is a fundamental change in the structure of blockchain blocks. Currently, a block size is fixed at 1MB in size. After segwit, it will be around 2MB.
Each Bitcoin transaction has three components that you can see in the image below:
In a bitcoin transaction sender sends the bitcoin, the receiver receives the bitcoin and it is verified by a digital signature also know as 'Witness'.
Segregated witness means separating witness from the bitcoin transaction so as to reduce the file size.
So, if we look at the current block structure it is a combination of Block Header + (Transaction Details + Signature).
The majority of the block space around 99% is utilized by transaction details of which 65% is occupied by signature. Since transactions details are data heavy they are clogging the block and are slowing the overall block transaction speed.
Now, if we look at the segwit block structure the witness will be placed in an extended block and will still be transmitted. However, it won't be a part of the parent block.
By removing witness there will be free space to record more transactions and the parent block transactions will become faster and hence it will reduce the scalability issue.
Also, 'Segwit' is a soft fork that means it doesn't need to take the consensus of Bitcoin network to modify the block structure.
Key objectives of Segwit:
- The basic objective behind segwit is to compress the file size of Bitcoin transactions thereby increasing the number of transactions per block.
- To curb the transactions scalability issue.
- To reduce transaction fees.
- To reduce the file size of the parent block.
Conclusion
Segwit soft fork is already a moot point between miners, individuals and businesses. But at the same time, it is necessary to speed up the bitcoin transactions. We are already seeing new cryptocurrencies capable of performing block transactions 10x times faster than Bitcoin. As a crypto enthusiast, I can only hope for the best possible outcome of 'Segwit' implementation.
Let me know what you guys think about 'Segwit'. Is it really going to help or the issues will still float around Bitcoin transactions?
Very informative post. How this will affect the miners, less commissions?
Miners believe segwit won't serve the purpose...miners might have some other hidden agenda but they haven't opened up about it yet
Thanks! Clear article.
Welcome
Very useful. Thanks :D
Welcome :)
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