ADSactly Crypto: Why SegWit Is a Big Deal For Bitcoin
Our favourite cryptocurrency, the big B has been a controversial addition to the financial and tech world since its birth over a decade ago. As it continues to increase in price and notoriety, so does questions on how it can scale past being just a digital gimmick and store of value.
Altcoins are all making plays for niche purchases where Bitcoin falls short and support the space with fresh ideas and alternatives for consumers.
However, Bitcoin is far from being left behind by innovation. In a bid to bring Bitcoin into the future plenty of ideas were thrown around and one of them that took hold was SegWit. A solution put forward by Bitcoin developer Dr Pieter Wuille.
Since Bitcoin has a block size limit, one that Bitcoin Cash has forked to change it has also placed a limit on the amount of data/transactions that can be added per block.
Image source: - bitcoinmagazine.com
What does SegWit do?
SegWit improves the use of the block size limit on a blockchain by removing signature data from Bitcoin transactions.
The digital signature accounts for 65% of the space in a given transaction. SegWit lets the blockchain ignore the need for this data attached to a signature by stripping off the signature from within the input and moving it to a structure towards the end of a transaction.
Since certain parts of a transaction are removed, this frees up space or capacity to add more transactions to the chain.
The name SegWit comes from combining two words, Segregate, which means to separate, and Witnesses are the transaction signatures.
SegWit as a solution
So how does SegWit help Bitcoin improve? So what if more transaction data can now be added per block?
The removal of the signature data increases the 1 MB limit for block sizes to a little under 4 MB in addition to slightly increasing the capacity size of blocks.
SegWit also solves the problem where a receiver could intercept and modify the sender’s transaction ID in a bid to get more coins from the sender.
Since the digital signature would be detached from the input offers an added layer of security.
Image source: - www.pexels.com
What Are the Benefits of SegWit?
SegWit's moving of the “witness” data of a transaction that includes the signature, to a new part of a Bitcoin block has also paved the way for second-layer solutions such the Lightning Network and Liquid Network.
As a bonus, SegWit also offered a modest block size which means more transactions can be added per block that users with SegWit-supporting wallets pay lower transaction fees.
SegWit will also make it easier to deploy further upgrades to the Bitcoin protocol. One update rumoured to be next is Schnorr signatures.
So what do you think of SegWit? Is it a step in the right direction? What upgrade would you like to see come to the Bitcoin blockchain?
Written by @chekohler
Sources
Previous ADSactly Crypto posts
- ADSactly Crypto: What Is The Bitcoin Liquid Network?
- ADSactly Crypto: What Is Ethereum Sharding All About?
- ADSactly Crypto: Why Is the Bitcoin Hashing Rate Important?
- ADSactly Crypto: What Is Blockchain Interoperability?
- ADSactly Crypto: What Are Bitcoin Forks?
- ADSactly Crypto: What Are Bitcoin Transfer Accelerators?
- ADSactly Crypto: Fungibility And Confidential Transactions
- ADSactly Crypto: A Break Down Of Bitcoin Value
- ADSactly Crypto: How Many Bitcoin's Have Already Been Lost Forever?
- ADSactly Crypto: What Is the Bitcoin Halving?
- ADSactly Crypto: What Is A Bitcoin Paper Wallet
- ADSactly Crypto: The Importance of Private Keys
- ADSactly Crypto: How Bitcoin Futures Could Affect The Future Of Bitcoin
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Thank you for your post. I admit I know very little about cryptocurrencies, so it was refreshing to find an article that was easy to follow. I look forward to reading more of your work. Thanks again.
That's very kind of you, I'm glad you enjoyed the post, this series is all about taking concepts and making them easy to understand. I think it can get overwhelming with all the jargon from both finance and tech being mashed together that the new crypto owner can quickly get confused
Your information, for the ignorant in this matter like me, is always welcome. It brings us closer to the knowledge of a somewhat arid world (in my case) and can even serve as an alert. Yesterday I was reading an article that appeared in a Venezuelan newspaper, El Nacional, which talks about the challenges of Bitcoin for 2020 (I don't know if you read Spanish, but I'll put the link up anyway). There they talk about applying a "halving" this year, which is supposed to be beneficial. I was commenting that as a way of "saying something". Greetings.
Yes the halving of rewards for miners should come in around May this year so less rewards in BTC and less liquidity on the market means prices will theoretically climb as less new BTC is dumped onto the market and if competition remains the same for BTC it has to move up in price. It will be really interesting this is the 3rd halving and each of the previous two have seen large price movements
Hi @adsactly ,
I have a question and maybe you know the or you have some thoughts on this.. Wen i was looking on coinmarketcap today i see that Steem is almost at his max supply of tokens. What do you think that will happen once we reach the point of all Steem tokens being in circulation.. i am curious about your thoughts on this.. kind regards, @davidamsterdam
The steem chain produces new steem at a rate of 9.5% inflation and reduces each year by 0.05% and eventually, it will settle at 0.5% inflation forever from the reward pool so there will never be a fixed supply of steem like as with BTC where we know it will be 21 million
Thank you for this awnser... 👍
Interesante esta información
thanks, glad you found it informative
Awesome
Thanks, glad you enjoyed the post
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