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Web3 Encyclopedia
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  • πŸ˜€Evolution from Web 1.0 to Web 3.0
    • Web 1.0 Web 2.0 Web 3.0
    • Key Features
    • Current Limitations
    • Future of Web 3.0
    • Learn: What Is Web3?
    • Learn: Will Every Brand Have a Web3 Strategy?
    • Learn: Big Ideas in 2023
    • Learn: The Web3 Paradox: Why Scaling Usage Alone Won't Lead to Mass Adoption?
    • Learn: Is Web3 A Marketing Buzz or Tech Revolution?
    • Learn: What is the relationship between blockchain and Web3?
    • Learn:Empowering Women in Web 3.0: The Role and Contributions of Women in Blockchain, DeFi, and dApp
    • Learn: Web 3.0 and the Future of E-Commerce
    • Learn: 12 ways ecosystem projects can attract more developers
    • Learn: How Web3 is Impacting Education?
    • Learn: Web3 And The Future Of Digital Advertising
    • Learn: Web3’s impact on personalization, trust and engagement
    • Learn: Web3-Powered Identity Management -- Unlocking the Benefits of Decentralization
    • Learn: Why Web2 companies fail in Web3 while others made it?
    • Learn: To Identify or Not in a Web3 World?
    • 🀫[Insider Series] McKinsey x Web3
    • TL;DR πŸ‘€
  • πŸ’²Blockchain Fundamentals
    • Why is Blockchain So Popular?
    • Introduction to Blockchain
    • Blockchain Misconceptions
    • Blockchain vs Bitcoin, Database, Cloud
    • Consensus Mechanism
    • Public and Private Keys
    • Hash Functions and Cryptography
    • Sharding
    • Types of Blockchains: PoW, PoS and Private
    • Understanding Cryptocurrency
    • Coins vs Tokens
    • Blockchain Trilemma
    • Legality
    • Learn : Google’s Cloud Based Blockchain Node Service
    • Learn: How Blockchain, Digital assets, and Web3 Unlock Financial Inclusion Globally
    • Learn: Will Chinese-Made Crypto Soar Higher?
    • Learn: What Does MiCA Mean for Crypto in Europe?
    • Learn: Unraveling the Intricacies of Blockchain Forensics and Asset Tracking
    • Learn: Promising blockchain use cases in healthcare industry
    • Learn: The Role of Blockchain in Authenticating and Provenance Art
    • Learn: Blockchain-Based Digital Identity: Benefits, Risks, and Implementation Challenges
    • Learn: The Future of Energy Supply Chains
    • Learn: Revolutionizing smart contracts and cryptocurrency
    • Learn: Nigeria goes blockchain
    • Learn: A Game Changer for Online Gaming?
    • Learn: Is blockchain technology ready for high-storage applications?
    • Learn: Will Blockchain Technology Mark a Turning Point in Fraud Prevention?
    • Learn: Why ZK-rollups need data availability?
    • Learn: How will generative AI disrupt blockchain?
    • Learn: A New Blockchain for Generative AI?
    • TL;DR πŸ‘€
  • 🏟️Web3 Utilities
    • Decentralized Applications (dApps)
    • Cross-chain Bridges
    • DAO
    • Artificial Intelligence
    • Learn: Is Community-building Essential for Web3 Startups?
    • Learn: β€˜Decentralization Theater’
    • Learn: Crypto and AI- A yay or nay combination?
    • Learn: Dissecting the DAO
    • Learn: What is motivating Lido DAO to rise?
    • Learn: How to Turn Your Community Into a DAO?
    • Learn: The Key to Decentralized Decision Making
    • Learn: How Web 3.0 can disrupt the supply chain industry?
    • TL;DR πŸ‘€
  • πŸͺ™Bitcoin
    • What is Bitcoin
    • Bitcoin's Blockchain Technology
    • UTXO Model and Transaction Fees
    • Bitcoin Mining and Mempool
    • Learn: What is bitcoin mining?
    • What are Hard Forks and Soft Forks
    • What is SegWit and the Lightning Network
    • Bitcoin Ecosystem
    • Can Bitcoin be Destroyed? Game Theory and Network Attacks
    • Learn: Crypto token supplies explained
    • Learn: What is crypto tax-loss harvesting, and how does it work?
    • Learn: Can Crypto Go Green? How to Invest in Eco-Friendly Cryptocurrencies
    • Learn: Why Did FTX Collapse? Here’s What to Know.
    • Learn: How Sam Bankman-Fried swindled $8 billion in customer money?
    • Learn: How much is Bitcoin worth today?
    • Learn: The Costs of Running a Bitcoin Node In Nigeria
    • Learn: Has 2022 Left Any Crypto Positives?
    • Learn: How Crypto Exchanges Can Be Free of Risk?
    • Learn: Greed, Lies and FTX: Is Crypto a Force for Good or Evil?
    • Learn: Is Crypto a Cultural Movement?
    • Learn: What are the consequences of crypto’s ongoing regulatory process?
    • Learn: Beyond the Crash and Embracing NFTs?
    • Learn: Understanding crypto bag holders and their mindset
    • Learn: Inscriptions: Just A Fad, Or A Real Threat To Bitcoin Becoming Decentralized Money?
    • Learn: How Bitcoin Ordinals Can Change the Future Of Mining?
    • Learn: What is a supernet?
    • Learn: Bitcoin Miners Celebrate 10 Years Since First ASIC, What Changed Since Then?
    • Learn: Bill Vs. CBDC – Why This US Congressman Wants To Block The Fed From Issuing A Digital Dollar?
    • Learn: Why Bitcoin Will Blow People’s Minds In 2025?
    • Learn: How the Howey Test Sheds Light on Cryptocurrency's Regulatory Gray Area
    • Learn: Cryptocurrency vs AI: A Complex Debate
    • Learn: Where the U.S. Government Went Wrong in Regulating Crypto?
    • Learn: The Nostr Privacy Paradox
    • Learn: Do algorithmic stablecoins have a future as centralized coins are under scrutiny?
    • Learn: Is Bitcoin Set To Revolutionize The Financial World With Its Superior Purchasing Power?
    • Learn: What is Shibarium, and what does it mean for Shiba Inu?
    • Learn: What is a crypto dusting attack?
    • Learn: Is the Adoption of Central Bank Digital Currencies (CBDCs) the Future?
    • Learn: How Artificial Intelligence Could Revolutionize Crypto?
    • Learn: What’s next for EU’s crypto industry as European Parliament passes MiCA?
    • Learn: Why the EU Has MiCA and the U.S. Has Securities Law Confusion?
    • Learn: Six New Projects Looking to Mitigate Bitcoin Mining’s Energy Footprint
    • Learn: Who on Crypto Twitter chose not to pay for a blue checkmark?
    • Learn: What is the wash-sale rule in Crypto?
    • Learn: What is Pepecoin and can it flip memecoins Dogecoin and Shiba Inu?
    • Learn: Can you recover stolen Bitcoin from crypto scams?
    • Learn: What the β€˜anti-mining bill’ means for the crypto industry in Texas?
    • Learn: Does the US have a crypto β€˜tax loophole’ problem?
    • Learn: How users can stay protected?
    • Learn: How Crypto Revolutionize Cheaper and Faster Transactions?
    • Learn: Can NFTs and CFDs be BFFs?
    • Learn: A PR expert’s tips for memecoin projects
    • Learn: Why politicians aren't convinced about the Digital Euro?
    • Learn: How A 90-Year Old TA Theory Predicted The Sudden Bitcoin Boom?
    • Learn: Social Trading Platforms and CFDs: A New Paradigm in Investment
    • Learn: How could the Chinese economic crisis impact Bitcoin and crypto?
    • Learn: How do they compare: Bitcoin IRA vs. traditional IRA?
    • Learn: Why Tokenized Assets Are Safer During a Banking Crisis?
    • TL;DR πŸ‘€
  • πŸ›’οΈEthereum
    • Bitcoin vs Ethereum
    • What can Ethereum do?
    • What is Ether (ETH)?
    • What's Unique About ETH?
    • What are Smart Contracts?
    • Energy Consumption?
    • Ethereum Virtual Machine (EVM)
    • Pros & Cons of Smart Contracts
    • Decentralized Applications (dApps)
    • Ethereum Token Standards (ERC-20, ERC-721 and ERC-1155)
    • Evolution of Ethereum
    • How to Get Your First Ethereum
    • Learn: Next Ethereum Upgrade β€” Shanghai Upgrade
    • Learn: Tipping Scale for Crypto Adoption: Usability vs. Accessibility
    • Learn: Major Publicly Traded U.S. Bitcoin Miner Files For Chapter 11 – Impact On The Market?
    • Learn: 5 altcoin projects that made a real difference in 2022
    • Learn: How Tether Can Be a More Stable Stablecoin?
    • Learn: Are the Ethereum Killers Still Deadly?
    • Learn: What Ethereum Tech Trends Are Weathering the Bear Market?
    • Learn: How Ethereum’s token burns are making it a deflationary cryptocurrency?
    • Learn: A few things to know about Ethereum's Shanghai Upgrade
    • Learn: The Role of Enterprise Ethereum
    • Learn: Understanding Layer 2 Scaling Solutions for the Ethereum Network
    • Learn: The Battle of Giants: Bitcoin vs Ethereum
    • Learn: Cryptography, Smart Contracts and Distributed Networks
    • Learn: The Memecoin Grift and How It Threatens Ethereum Culture
    • Learn: What Is Ethereum’s β€˜Data Availability' Problem, and Why Does It Matter?
    • TL;DR πŸ‘€
  • πŸ‘›Wallet
    • What is a Blockchain Wallet?
    • Hardware / Software Wallet
    • How to Get Your First Cryptocurrency
    • Setting up Metamask Wallet
    • Learn: How to connect the Avalanche network to MetaMask?
    • Learn: How to pass on your crypto when you die?
    • Learn: What are hierarchical deterministic (HD) crypto wallets?
    • Learn: Pros and Cons of Digital Wallets
    • Learn : How Web 3.0 Wallets Are Redefining Digital Asset Security?
    • Learn: Open source: Buzzword or real security for crypto wallets?
    • TL;DR πŸ‘€
  • πŸŒ•New & Rising Protocols
    • Binance
    • NEAR
    • Solana
    • Fantom
    • Polygon
    • Cardano
    • Polkadot
    • Cosmos
    • Harmony
    • Cronos
    • Optimism
    • Terra
    • Who Will Win the L1 Wars?
    • Learn: New Layer 1 Blockchains Are Expanding the DeFi Ecosystem But No Eth Killers Yet
    • Learn: Is an Increased Focus on Layer-2 Scaling and ZK Technology Justified?
    • Learn: What Are the Stakes in the SEC vs. Ripple Case?
    • Learn: What is The Graph, and how does it work?
    • TL;DR πŸ‘€
  • πŸ“ˆDecentralized Finance (DeFi)
    • CEX vs DEX
    • CeFi vs DeFi
    • Algorithmic Stablecoins
    • Airdrop
    • Liquidity Pool
    • Impermanent Loss
    • Swapping
    • Wrapped Token
    • Arbitrage Opportunities
    • Staking
    • Yield Farming
    • Total Value Locked (TVL)
    • Gas Fees
    • Lending & Borrowing
    • Useful Tools
    • Activity: Uniswap & Pancake Swap
    • Learn: Automated Market Makers (AMMs) in DeFi
    • Learn: Crypto Moving towards ESG: What Is Regenerative Finance (ReFi)
    • Learn: What Is dYdX? Understanding the Decentralized Crypto Exchange
    • Learn: It's A Wrap - DeFi in 2022
    • Learn: Why DeFi should expect more hacks this year?
    • Learn: The Security Challenges of DeFi
    • Learn: The Promising Future of Decentralized Social Media on Web 3.0
    • Learn: Can CBDCs, Tokenized Deposits, Stablecoins and DeFi Coexist?
    • Learn: The Increasing Popularity of DeFi and Its Potential to Disrupt Traditional Finance
    • Learn: The future of DeFi is ReFi
    • Learn: DeFi aggregation
    • TL;DR πŸ‘€
  • πŸ™ˆNon-Fungible Token (NFT)
    • What are NFTs?
    • Case Study
    • Storage
    • Who are the Players?
    • NFT Marketplace
    • NFT Useful Resources
    • Activity: Mint Your Own NFT
    • Learn: How You Can Prevent Hackers From Stealing Your NFTs?
    • Learn: What Is an NFT Floor Price?
    • Learn: Should Bored Ape buyers be legally entitled to refunds?
    • Learn: China’s view of NFTs different from rest of the world’s
    • Learn: NFTs IRL: How Digital Collectibles Are Forging Offline Experiences
    • Learn: How NFT Brands Can Cut Through The Noise
    • Learn: How Web3 disrupts the music sector?
    • Learn: Unlockable content in NFTs
    • Learn: Why Meta Matters in NFTs?
    • Learn: Should NFT Marketplaces Become Centralized?
    • Learn: HermΓ¨s vs. MetaBirkins: The NFT Case That Could Have Major Trademark and Artistic Consequence
    • Learn: What are phygital NFTs, and how do they work?
    • Learn: What is NFT ticketing and how does it work?
    • Learn: Why Solana NFT marketplace is seeing less active users?
    • Learn: NFTs and Intellectual Property
    • Learn: How AI Is Changing Artistic Creation and Challenging IP Laws?
    • Learn: The Future of NFTs: Exploring Dynamic NFTs and Their Versatile Use Cases
    • Learn: NFTs in the event and ticketing industry
    • Learn: What is NFT rarity, and how to calculate it?
    • Learn: What happens to your NFTs when you die?
    • Learn: Dogecoin-Like Spike in Milady NFTs After Elon Musk’s Tweet, But Will It Last?
    • Learn: What are NFT royalties, and how do they work?
    • Learn: How developers aim to store crypto inside NFTs?
    • Learn: Generative Art NFTs: What Are They & Why Are They So Popular?
    • TL;DR πŸ‘€
  • πŸ’—Metaverse
    • What is the Metaverse?
    • Metaverse Economy
    • Metaverse Companies
    • GameFi
    • Learn: Are We in the Metaverse Yet?
    • Learn: Can the Metaverse exist without blockchain?
    • Learn: Can the Metaverse Facilitate Sustainable Growth of Defi Systems?
    • Learn: What is the role of biometrics in the metaverse?
    • Learn: Can metaverse be the future court?
    • Learn: Metaverse Fashion Is on the Rise, but for Whom?
    • Learn: Sustainability in the Metaverse: Challenges and Opportunities
    • Learn: How To Build A Responsible Metaverse?
    • Learn: What is a VTuber, and how do you become one?
    • Learn: How proof-of-identity provides human experiences?
    • Learn: The β€œMetaverse” Next Frontier for Business: Impact And Challenges
    • Learn: The 5 Biggest Misconceptions About The Metaverse
    • Learn: Why culture and ownership are critical to the metaverse?
    • TL;DR πŸ‘€
  • πŸ‘ΎCareer in Web3 (coming soon)
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    • UI/ UX Designers
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On this page
  • What is Segregated Witness (SegWit)?
  • Understanding Segregated Witness
  • Goals of SegWit
  • Why was SegWit a good idea?
  • Is SegWit a Soft Fork?
  1. Bitcoin

What is SegWit and the Lightning Network

PreviousWhat are Hard Forks and Soft ForksNextBitcoin Ecosystem

Last updated 2 years ago

What is Segregated Witness (SegWit)?

Segregated Witness (SegWit) refers to a change in the transaction format of Bitcoin. Its stated purpose as a protocol upgrade was to protect against transaction malleability and decrease transaction times by increasing block capacity. Transaction malleability refers to the possibility that tiny pieces of transaction information could be changed, invalidating new cryptocurrency blocks.

It was also intended to speed up the validation process by storing more transactions in a block.

Understanding Segregated Witness

The Bitcoin Network consists of thousands of computers that work as validators for the blocks created by miners. These computers are called 'nodes', which each keep a of every transaction. This record is called a ''.

The Bitcoin Network faced several problems as it matured. One was that more transactions were occurring, which added more blocks to the chain. Blocks are created every 10 minutes and used to be constrained to a maximum size of one megabyte (MB). Due to this constraint, only a certain number of transactions could be added to a block.

The number of transactions being conducted, represented by the blocks, was weighing down the network and causing delays in processing and verifying transactions. In some cases, it took hours to confirm a transaction was valid. Without SegWit's implementation, Bitcoin transaction validation would have slowed to a crawl as the cryptocurrency grew in popularity and the number of transactions increased.

The SegWit protocol divides the transaction into two segments. The unlocking signature (the 'witness' data) is removed from the original portion, but it remains a part of the blockchain as a separate structure at the end. The original portion holds the sender and receiver data, while the separate structure at the end (the 'witness' structure) contains scripts and signatures.

As a result of this segregation of data, more space is created and more transactions can be added to the blockchain.

Goals of SegWit

To understand the goals behind SegWit's implementation, it's essential to understand what's going on behind the scenes that makes it useful.

The main issue that SegWit addressed

When one user sends another user some Bitcoin, two pieces of information are required: a and a private key. A public address is a digital identifier for the entities involved in the transaction. Every user has a public address to receive and send Bitcoin, and the entire network can see these addresses. cannot be seen β€” they are used as verification that the public addresses belong to a user.

On a basic level, SegWit is a process that changes the way data are stored, therefore helping the Bitcoin network to run faster.

The process for transferring bitcoin starts when one user broadcasts a request to the network. This request includes the user's public address, the amount of bitcoin being sent, and a transaction fee for the miners.

Finally, the block is broadcast to the nodes; if more than half of all nodes agree that the information is valid, the block is confirmed and added to the blockchain. At this point, the bitcoin has successfully been transferred between users.

Over time, the network began to experience a slowdown in the number of transactions it could process as Bitcoin became more popular. Developers traced this issue back to the size limit of the blocks within the blockchain.

SegWit was formulated by Bitcoin developer Pieter Wuille. Wuille is also the co-founder of Blockstream, a software company specializing in digital security for financial services.

How SegWit addressed the issue

For example, block 720399 was mined on Jan. 25, 2022. It had a size of 1.558 MB but was 3.993 million WU. Block 720340 was mined 21 minutes later and was 1.457 MB with a weight of 3.993 million WU. Earlier the same day, a block was mined with a size of 1.188 MB, with 3.993 WU. This demonstrates that there is not necessarily a size limit in megabytes, but a limit based on the weight, taking the block's base size and total size into account. This creates more space for data, which increases the speed of transaction validation.

SegWit enhances the security of Bitcoin's blockchain by preventing transaction malleability β€” the ability to change small pieces of information in a block.

Why was SegWit a good idea?

The cryptocurrency community still debates whether SegWit is good or bad, but security enhancements and decreased transaction times benefit the blockchain, miners and nodes that accept it. SegWit led to the implementation of Taproot, an upgrade to Bitcoin built upon SegWit that allows for even faster validation.

Is SegWit a Soft Fork?

SegWit is a soft fork of the Bitcoin blockchain. Soft forks are changes that do not create a new blockchain, while a hard fork does.

Source

Next, process the transaction; information from both users is encrypted, which means the data is turned into a line of computer code called the transaction ID. At this point, the transaction is queued. Transactions are added to the queue until the block limit is reached and a block is created.

SegWit was the solution to a blockchain size limitation problem that reduced Bitcoin transaction speed. Bitcoin developer Dr. Pieter Wuille suggested that to solve this problem, the digital signature of the transaction witness needed to be segregated from the transaction data. Bitcoin transitioned to a block weight limit under SegWit of four million weight units (WU). A block that does not use SegWit holds one million WU, while one that uses SegWit has a limit of four million WU. Because old blocks were limited to one MB, many fans believe that one MB equals one million WU (the non-SegWit block limit) and then correlate the four million WU limit to an increase of block size to four MB. While there was a block size increase following SegWit's adoption, the limit is not in megabytes.

SegWit also paved the way for Bitcoin to enable smart contracts and upgrade to another version, . Is SegWit secure?

1) . By Updated January 25, 2022. Reviewed by

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JAKE FRANKENFIELD
SOMER ANDERSON