Segregated Witness (Segwit) Meaning

Segwit is a major upgrade to the Bitcoin protocol that was activated in 2017. Its primary goal was to solve Transaction Malleability (a bug that allowed people to change a transaction's ID before it was confirmed) and to increase the Effective Block Size without a contentious hard fork.

It did this by Segregating the transaction's digital signature (the Witness data) from the main part of the transaction.By moving the signature data to a separate part of the block, Segwit reduced the Weight of transactions. This allowed more transactions to fit into a single 1MB block, effectively increasing Bitcoin's capacity to about 2-4MB without actually changing the 1MB limit.

More importantly, by fixing malleability, Segwit paved the way for Layer 2 solutions like the Lightning Network, which rely on being able to create Unconfirmed transactions that cannot have their IDs changed by a malicious actor.For the end-user, Segwit manifests as a New Address Type (starting with 3 or bc1). Transactions sent from these addresses are cheaper because they take up less Weight in the block.

Today, over 95% of Bitcoin transactions use Segwit, and it is considered one of the most successful Soft Fork upgrades in history, significantly improving the network's efficiency and enabling the current era of Programmable Bitcoin.