The move of the Bitcoin community to implement SegWit, which also led to the hard fork that created the new altcoin bitcoin cash was welcome by the majority of the community as well as investors who witnessed the price of bitcoin rally to new all-time highs.
What Does the SegWit Implementation Mean for the Bitcoin Network?
SegWit’s most prominent feature and the key reason why it was implemented to tackle Bitcoin’s scalability challenges is that it increases the effective block size but does so without increasing the block size limit. SegWit does that by removing signature data in each block to increase the amount of transactions that can be processed. That means that the Bitcoin blockchain can process more transactions per second than it was able to before.
The SegWit protocol upgrade also provides several other improvements to the Bitcoin network.
Firstly, it eliminates the issue of transaction malleability, which was the original reason why SegWit was actually first proposed back in 2015. Transaction malleability refers to when a user changes the ID of a signed transaction before it is confirmed by the network at which point he or she could then claim a transaction was made that never occurred. This is something that has been an issue for bitcoin exchanges, including for the now defunct Mt.Gox exchange.
Secondly, SegWit allows for script versioning, which refers to the ability to make additions and updates to the code that are non-contentious. It does this by adding a version number to future network adaptations. This will allow Bitcoin network participants to opt-in or opt-out of new upgrades such as sidechains, the Lightning Network or Schnorr signatures without the risk of a hard fork.
Thirdly, the Bitcoin blockchain also receives a security boost in the form of the pay-to-script-hash (P2SH), which increases the security of multi-signature transactions through an upgrade of the cryptography used in Bitcoin's blockchain.
Additionally, linear scaling of sighash operations is being introduced, which augments the manner in which transactions signatures are computed so that each byte only needs to be hashed twice instead of four times. This allows for better scaling opportunities without jeopardizing security.
The Next Hurdle Comes in November
While the majority of the Bitcoin community is rejoicing at the (so far) successful implementation of SegWit and a fresh all-time high in the price of bitcoin, the cryptocurrency is not entirely out of the woods yet.
As part of the so-called New York Agreement (also known as SegWit2x), which was signed by a large number of bitcoin startups and mining operations, a contentious proposed hard fork that would increase the block size of the Bitcoin network from one megabyte to two megabytes is scheduled for late November.
However, for this implementation to occur, the vast majority of miners would have to agree to this and mine the larger blocks. So far, it seems that this proposed hard fork looks rather unlikely as it is not gaining enough support from network participants.
Source: https://btcmanager.com/segwit-lock-in-what-does-it-mean-for-bitcoin/