SegWit (Segregated Witness, BIP 141)

SegWit (Segregated Witness) is the soft fork that activated on Bitcoin in August 2017, defined in BIP-141. It restructured how Bitcoin transactions store signature data, solving multiple problems at once.

The core change: signature data ("witness data") was moved out of the main transaction body into a separate structure that's still in the block but doesn't count against the original 1 MB block-size limit. Instead, blocks were redefined in terms of weight units, with a maximum of 4 million weight units per block. Witness data costs 1 weight unit per byte; non-witness data costs 4. This effectively roughly doubled capacity without a hard fork.

What SegWit fixed:

• Transaction malleability. Pre-SegWit, the txid was computed over the full transaction including signatures, which were malleable. Third parties could change a tx's appearance (and its txid) without invalidating it. This broke unconfirmed-transaction chains and made layer-2 protocols nearly impossible to build safely. SegWit excludes witness data from the txid computation, so the txid is now stable from the moment a tx is signed.
• Block capacity. Effective block size went from ~1 MB to up to ~4 MB (~2 MB in typical usage with mixed transaction types).
• Future upgrades. SegWit introduced a versioning scheme for witness data that allowed Taproot (witness version 1) to be added later as a clean soft fork.

The 2017 activation was politically explosive - it came out of the multi-year "scaling wars" between people who wanted bigger raw block size and people who wanted layer-2 scaling. The bigger-block side eventually forked off as Bitcoin Cash. The remaining Bitcoin community kept SegWit and the layered-scaling roadmap, and the Lightning Network - which depends on stable txids - became viable shortly afterward.

Initial adoption was eased by P2SH-wrapped variants - P2SH-P2WPKH and P2SH-P2WSH - that let receivers collect SegWit benefits behind a familiar 3... address senders already knew how to handle. By 2019-2020 most wallets had migrated to native SegWit (bc1q...), and the wrapped variants became legacy.

By 2026, the large majority of new Bitcoin outputs are SegWit or Taproot. Pre-SegWit legacy outputs still exist but are gradually being spent.