Referred to as a solution to increase the effectiveness of bitcoin transactions, SegWit made waves in the crypto market in 2017. Its presence has its pros and cons, but so far the SegWit protocol has been able to work on the Bitcoin blockchain. So what is SegWit and how does it increase the effectiveness of Bitcoin transactions?
What is SegWit?
SegWit is short for ‘Segregated Witness’, an enhancement protocol for Bitcoin transactions. Segregated means separation and Witness means sign. In this case, both are processes of separating transaction tokens. In the SegWit protocol, Bitcoin transactions are overhauled by putting a limit on the block size so there is room for more transactions. In other words, all transactions that occur on the Bitcoin blockchain can be faster and cheaper.
SegWit was first proposed by Dr. Pieter Wuille, a Bitcoin developer, in 2015. He found that digital signatures in a Bitcoin transaction take up 65% of the size of the entire transaction. From this, he proposed a protocol in which there is a transfer of digital tokens from transactions so that the Bitcoin transaction size becomes smaller.SegWit was first tested on Litecoin and finally introduced as the Bitcoin Improvement Proposal (BIP) in August 2017 after seeing the success of the trial.
In addition, SegWit also works to correct errors in the Bitcoin transaction protocol, such as changing the transaction ID with digital signature manipulation. The chance of manipulation can make irresponsible parties break into the identity of the transaction. Segwit minimizes the possibility of manipulation, so Bitcoin transactions can occur more securely.
Benefits of SegWit for Bitcoin
Bitcoin is the most popular type of crypto. However, the Bitcoin system still requires a lot of development to simplify and speed up transactions. With the reduction of data from the SegWit protocol, the block capacity becomes larger so that it can process more transactions.
This capacity also increases transaction speed, so more transactions can be processed in a shorter amount of time. The existence of SegWit also makes the transaction system cheaper. By applying SegWit, transaction fees can be reduced by up to 25%.
Pros and Cons of SegWit
There have been several parties who do not support the SegWit protocol since its inauguration in 2017. One of them is the miners from China who prefer the Universal Bitcoin protocol. As one of the largest market holders in Bitcoin mining, they believe that the reduced fees in the SegWit system reduce their earnings. In addition, there are many digital wallet services that do not necessarily support SegWit. In 2018, only 14% of wallet services implemented the SegWit system. The number is now increasing, but not all of them are using this protocol.
In addition, many Bitcoin developers think that the SegWit protocol is just a short-term solution to a long-term problem. They argue that SegWit doesn’t solve the scalability issues Bitcoin is facing, and that only major changes to the size of the blockchain can help the platform to scale in the future.
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