SegWit (Segregated Witness)

🔹 What is SegWit?

• SegWit = Segregated Witness
• It was a Bitcoin upgrade in 2017.
• Separates signature (witness data) from transaction data.
• Helps fix transaction malleability and improves Bitcoin scalability.

🔹 Why Was SegWit Needed?

✅ Transaction Malleability Fix

• Before SegWit, txid (transaction ID) included the signature.
• Attackers could modify the signature → Change txid without changing the transaction.
• This caused issues for Lightning Network and Bitcoin apps.
• SegWit removes signatures from the txid calculation, fixing this issue.

✅ More Transactions per Block

• Transactions become smaller → More transactions fit in a block.
• Lower fees and faster confirmations.

🔹 How SegWit Works

• Moves the signature (witness) data outside the main transaction.
• New txid = Only inputs + outputs (excludes witness data).
• Prevents txid changes even if the signature is modified.

🔹 Address Formats After SegWit

1️⃣ P2SH (Pay-to-Script-Hash)

• Starts with 3 (e.g., 3QJmV3qfvL9SuYo34YihAf3sRCW3qSinyC).
• Legacy way of using SegWit inside a standard script hash.

2️⃣ P2WSH (Pay-to-Witness-Script-Hash)

• Starts with bc1q (e.g., bc1qxy2kgdygjrsqtzq2n0yrf2493p83kkfjhx0wlh).
• Fully native SegWit, lower fees.

🔹 Benefits of SegWit

✅ Fixes transaction malleability (prevents txid changes).
✅ More transactions per block (improves scalability).
✅ Lower transaction fees.
✅ Enables Lightning Network (for faster, cheaper payments).

🔹 SegWit Adoption

• SegWit is optional → Not all wallets/exchanges use it.
• Most wallets today support SegWit (e.g., Ledger, Trezor, Electrum).
• Some users still use Legacy (non-SegWit) addresses, leading to higher fees.