How SegWit Turned Bitcoin's Fate: The Evolution from 1MB to 4MB

Bitcoin initially faced an awkward bottleneck - the block size was limited to 1MB, which means the number of transactions that could be packed into each block was limited. Imagine when everyone wants to make a transfer, the network starts to get congested. This problem became increasingly severe before 2017.

How does signature data consume block space?

Each Bitcoin transaction requires a digital signature to prove “this money is indeed mine.” The problem is that this signature data is exceptionally large, occupying 65% of a block's capacity. In other words, most of the block's space is taken up by the “proof,” while the actual transaction information only occupies one third.

This is the problem that Bitcoin developer Pieter Wuille and other core contributors wanted to solve in 2015.

Innovations of SegWit: Isolation vs Reorganization

The core idea of SegWit (Segregated Witness) is very simple - to separate the transaction information from the signature information. Specifically, it adds a new “witness” field to the transaction format, moving verification data such as digital signatures and public keys to this independent area.

Smarter still, when calculating the block size, witness data is no longer included. This means that the same 1MB of physical space can actually accommodate more transactions—potentially expanding to an effect close to 4MB.

In August 2017, SegWit was officially activated on the Bitcoin network in the form of a soft fork.

What changes does this upgrade bring?

Transaction efficiency significantly improved The number of transactions that a block can hold has increased, which means that the number of transactions processed per unit of time (TPS) has significantly increased. Congestion has eased, and the transaction confirmation speed has consequently accelerated.

Resolved transaction extensibility vulnerability Before SegWit, attackers could modify the transaction ID before the transaction was confirmed. This sounds bizarre – akin to being able to change the amount on a check that has already been issued. Once SegWit moved the signature data out of the core of the transaction, such tampering became impossible.

Opened the door to the second layer of innovation It is precisely because the scalability issue has been resolved that second-layer protocols like the Lightning Network have a foundation for existence. These innovations further expand the application scenarios of Bitcoin.

Why are there still people opposed?

SegWit has sparked intense debate within the community. Some believe that this upgrade is overly complex and may introduce new security risks. Critics point out that certain transactions could have a vulnerability where “anyone can spend”.

The deeper division lies in the fact that developers opposing SegWit advocate for directly increasing the block size to solve the capacity issue. This dispute eventually led to the hard fork in 2017, resulting in Bitcoin Cash (BCH) — a Bitcoin branch that maintains a block size of 1MB or larger.

SegWit essentially represents a fundamental divergence in the Bitcoin community between “elegant scaling” and “brute force expansion.”