Crypto Academy Week 3 Homework Post for [@gbenga] Segwit Bitcoin Network and Legacy Bitcoin Network
Bitcoin emerged in 2008 with a technical document published by Satoshi Nakamoto. Satoshi Nakamoto is a person or a community that still remains a mystery. The first Bitcoin transaction was made in 2009 and the first payment transaction was made in 2010. In these transactions or when we send bitcoin to someone in today's transactions, this transaction is added to the bitcoin blockchain in a new block. These blocks contain information about our transaction. This information consists of sender information, recipient information and digital signatures. This digital signature is called a witness.
Legacy Bitcoin Network
Legacy Bitcoin Network is a Bitcoin network proposed by Satoshi Nakamoto and still in use today. When we send bitcoin to someone, that transaction is added to the bitcoin blockchain in a new block. In this new block added, the transaction consists of the sender information, recipient information and digital signatures. The digital signature covers approximately 50% of each transaction, and this is quite a high rate. The size of the new block to be added in the Bitcoin blockchain can be at most 1MB, and most of this size is made up of the signatures of the witnesses.
In the past, the number of people using Bitcoin was few and the number of transactions was small, so there was no problem. Since the transactions were few, it did not take much to verify the transactions.
But over time, the number of users increased and as the number of users increased, so did the number of transactions. Confirmation of transactions made with the Legacy Bitcoin Network has started to take longer, and some users sometimes had to wait for days. And as the business of miners making verification has increased, transaction fees have also increased.
Segregated Witness (SegWit)
SegWit is an update to the Bitcoin blockchain that does not require users to update the software they use to send and receive Bitcoins by connecting to the blockchain. In Legacy Bitcoin Network, signatures were included with the transaction data, but in SegWit, signatures are not included with the transaction data. SegWit does not change anything, it is just reorganizing the block data so that the signatures are not included with the transaction data.
In short, SegWit update involves separating witnesses (signatures) from transaction data. Since transaction data and signature data are separated, transaction block size is increased. Thanks to this change, more transactions can be stored in a single block, thus increasing the throughput of the network.The most important benefit of SegWit is the increase in capacity and speed of transactions. Also increased security for multi-signature transactions. Since signatures and data are separated, even if there are changes in signatures, there is no change in transaction data.
I gave you general information about Segwit Bitcoin Network and Legacy Bitcoin Network operations. I prefer SegWit. I've been using Bitcoin for many years, and I started using it to buy hosting. At first, there was no problem, sometimes the process was confirmed in 5 minutes, sometimes 10 minutes. Sometimes the hosting company delivered the product to me without the need for transaction confirmation. Back then, I would set transaction fees to the lowest for some transactions. As far as I remember, I would set the transaction fee to around 10 cents, although it would get a confirmation within 1 hour. But later, some transfers took more than 1 day to be confirmed.
I did not know much about the Bitcoin Network at the time and I started researching. I saw that the problem was solved by increasing the transaction fees, but after a while this was not enough. Transaction fees began to rise enormously, and delays began to occur. It was quite problematic days in instant transactions. SegWit was a good solution for me. Transactions were faster and cheaper than before. SegWit was a great solution for me as I also use Bitcoin for instant transactions. Segwit Bitcoin Network was faster, more secure and cheaper than Legacy Bitcoin Network.