Understanding SegWit: A Comprehensive Guide to Bitcoin's Scaling Solution

The Significance and Impact of SegWit

When Bitcoin was created, each block was limited to one megabyte in size. This constraint initially sufficed for the transaction volume of a small market. However, as Bitcoin's user base expanded, network congestion became a pressing issue.

The Bitcoin network updates with a new block approximately every ten minutes. Given the one-megabyte limit, each block can only contain a few dozen transactions. As of late 2025, Bitcoin processes an average of seven transactions per second. During peak periods, thousands of transactions can accumulate on the blockchain, with fees potentially reaching significant amounts. Network congestion can lead to transaction processing times of several days.

These challenges necessitated an effective technical solution to expedite Bitcoin transactions and reduce fees. Enter Segregated Witness (SegWit).

SegWit Explained

In 2015, Bitcoin developers created SegWit technology to address transaction processing speed issues. By 2017, SegWit was officially implemented as a soft fork, increasing the processing capacity of a single block by 1.7 times.

Currently, SegWit is utilized by several major cryptocurrencies, offering advantages in increased block capacity, faster transaction speeds, and improved transaction scalability.

Technical Principles of SegWit

SegWit divides transaction information into two parts: core transaction data and witness data. Transaction data records account balances, while witness data confirms user identity.

In traditional Bitcoin transactions, witness data (signature information) occupies significant space, reducing transfer efficiency and increasing costs. SegWit technology extracts witness data from transaction information and stores it separately, thereby speeding up transactions.

Key Advantages of SegWit

Enhanced Block Capacity

Signature information can occupy up to 65% of space in a Bitcoin transaction block. SegWit frees up this original block space, allowing for more transaction information processing.

Increased Transaction Speed

Similar to Layer 2 solutions, Bitcoin data is processed on layers to increase transaction speed. After implementing SegWit, the Bitcoin transaction system allocates more computing power and storage capacity to process transaction information, significantly reducing network load and increasing transactions per second (TPS).

Facilitating Layer 2 Solutions

SegWit has indirectly created conditions for the implementation of Layer 2 solutions, which are designed to address Bitcoin's scalability issues off-chain.

SegWit in Practice

For users, SegWit technology offers three key advantages:

1. Enhanced security compared to regular addresses
2. Expanded block capacity and faster transaction verification
3. Lower transaction fees compared to regular wallet addresses

As of late 2025, the adoption rate of SegWit has continued to grow, with an increasing number of users benefiting from these advantages.

Types of Bitcoin Addresses

Currently, Bitcoin address formats are mainly divided into four types:

1. Legacy (P2PKH)
2. Nested (P2SH)
3. Native SegWit (Bech32)
4. P2TR (Bech32m)

Native SegWit vs SegWit

When discussing SegWit, it's important to distinguish between Native SegWit and nested SegWit addresses. Native SegWit (Bech32) addresses offer the full benefits of SegWit technology, including:

1. Lower fees: Native SegWit transactions typically have the lowest fees.
2. Faster confirmation times: These transactions are prioritized on the network.
3. Improved efficiency: Native SegWit addresses use less block space.

In contrast, nested SegWit (P2SH) addresses are a transitional format, offering some SegWit benefits while maintaining backward compatibility with older wallets. While still an improvement over legacy addresses, they don't provide the full range of benefits that Native SegWit addresses do.

For optimal efficiency and cost-effectiveness, users are increasingly encouraged to use Native SegWit addresses where possible.

Conclusion

SegWit has proven to be a significant improvement for the Bitcoin network, addressing scalability issues and paving the way for further innovations. By separating witness data from transaction data, SegWit has increased block capacity, reduced transaction fees, and improved overall network efficiency. As adoption continues to grow, particularly of Native SegWit addresses, we can expect to see further benefits and developments built upon this technology, reinforcing Bitcoin's position as a robust and evolving cryptocurrency ecosystem.

FAQ

Can I send BTC from Native SegWit to SegWit?

Yes, you can send BTC from a Native SegWit address to a SegWit address. Both address types are compatible, and transactions between them are seamless and secure.

Should I use SegWit or native SegWit?

Native SegWit is recommended. It offers lower fees, faster transactions, and better security. While both are good, native SegWit is the more advanced and efficient option.

What is native SegWit in Bitcoin?

Native SegWit is an improved version of SegWit in Bitcoin, offering better efficiency and lower transaction fees. It uses bech32 addresses starting with 'bc1' and provides enhanced security and scalability for the network.

What is the difference between SegWit and native SegWit fees?

SegWit fees are slightly higher than native SegWit fees. Native SegWit transactions are more efficient and take up less block space, resulting in lower fees compared to regular SegWit transactions.