Segregated Witness (SegWit)

Segregated Witness, commonly shortened to SegWit, changes how a Bitcoin transaction is packaged. Rather than storing the digital signature (the "witness" data) mixed in with the sender and receiver details, SegWit strips it out into a separate section appended at the end of the transaction. This reorganization, defined in Bitcoin Improvement Proposal 141, fixed a long-standing bug called transaction malleability, which let a third party alter a transaction's ID before confirmation without changing what the transaction actually did.

SegWit shipped as a soft fork, so upgraded and non-upgraded nodes could keep validating the same chain. Miners signaled majority support for most of 2017, and the change formally activated on 24 August 2017 at block height 481,824, once the required 95% signaling threshold was reached.

Because witness data gets a discount when Bitcoin measures a transaction's size, SegWit transactions take up proportionally less room against the block weight limit than legacy ones, so more transactions fit per block and average fees drop. Just as important, closing the malleability loophole made it safe to chain unconfirmed transactions together, which is the technical foundation the Lightning Network needed to enable instant off-chain payments.

Adoption was slow at first: fewer than a fifth of transactions used SegWit a year after launch, but usage has since plateaued at roughly 85 to 90 percent of all Bitcoin transactions. Several Bitcoin-derived chains, including Litecoin, DigiByte, and Vertcoin, later implemented the same format in their own protocols.