Segregated Witnesses (also known as Segwit for short) are coming, as Bitcoin core made clear through a recent blog post. This addition to Bitcoin will be done in an extremely cautious way, as the next 0.13.0 update will include the code for the Segregated Witnesses, but it will not be activated until version 0.13.1. This will make testing other features on top of Segwit much easier for developers. Segregated Witnesses have already been activated on the testnet, where users and developers can also test features on. The 0.13.0 update is also expected to include code for other updates like fee filtering and compact block relay.
This update is expected to be released in the coming weeks and it is considered one of the most relevant additions to Bitcoin, when considering off-chain scalability, a long debated issue within the Bitcoin and Cryptocurrency community. This change would allow more data to be stored in Bitcoin transactions and more transactions to take place in the same window of time as before.
Segregated Witnesses update will allow transaction data to be split into different parts, rather than being contained in one single chunk of data. Segwit will, in this sense, take the digital signatures related to a specific transaction and separate them into their own Merkle tree. This allows signature data to be stored outside of the respective block, meaning that the digital signatures will not contribute to the block size. Since signature data takes up a ~75% of the current blocksize, while it would stay the same with the Segwit update, one could fit 4x as much data in one block as before. Since signatures will only prove that a transaction is valid, and not the sender or receiver, they can be discarded once they’re checked due to being in a separate data structure, meaning that full nodes will require less HDD space to store the blockchain. This update also eliminates transaction malleability, since segwit allows software that receives the transaction to calculate the txid of a segwit ativated transaction without the need to reference the witness.
In order for the Segwit change to be triggered, a soft fork needs to take place, meaning that the majority of nodes must update to the new client in order to allow the update to be compatible with older versions of the software.
“Segwit is a proposal to allow transaction-producing software to separate (segregate) transaction signatures (witnesses) from the rest of the data in a transaction, and to allow miners to place those witnesses outside of the traditional block structure. This provides two immediate benefits: Elimination of malleability & Capacity increase.” Bitcoin core blog.
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