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judymcconville@roadrunner.com 2017-05-02 13:51:44 -07:00
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[appendix] [appendix]
== Segregated Witness == Segregated Witness
Segregated Witness (segwit) is an upgrade to the bitcoin consensus rules and network protocol, scheduled for implementation in the second half of 2016. ((("segwit (Segregated Witness)", id="segwit16")))Segregated Witness (segwit) is an upgrade to the bitcoin consensus rules and network protocol, scheduled for implementation in the second half of 2016.
In cryptography, the term "witness" is used to describe a solution to a cryptographic puzzle. In bitcoin terms, the witness satisfies a cryptographic condition placed on a unspent transaction output (UTXO). In cryptography, the term "witness" is used to describe a solution to a cryptographic puzzle. In bitcoin terms, the witness satisfies a cryptographic condition placed on a unspent transaction output (UTXO).
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Both transactions are less expensive when segregated witness is implemented. But comparing the costs between the two transactions, we see that before Segregated Witness, the fee is higher for the transaction that has a negative Net-new-UTXO. After Segregated Witness, the transaction fees align with the incentive to minimize new UTXO creation, by not inadvertently penalizing transactions with many inputs. Both transactions are less expensive when segregated witness is implemented. But comparing the costs between the two transactions, we see that before Segregated Witness, the fee is higher for the transaction that has a negative Net-new-UTXO. After Segregated Witness, the transaction fees align with the incentive to minimize new UTXO creation, by not inadvertently penalizing transactions with many inputs.
Segregated Witness therefore has two main effects on the fees paid by bitcoin users. Firstly, segwit reduces the overall cost of transactions by discounting witness data and increasing the capacity of the bitcoin blockchain. Secondly, segwit’s discount on witness data correcting a misalignment of incentives that may have inadvertently created more bloat in the UTXO set. Segregated Witness therefore has two main effects on the fees paid by bitcoin users. Firstly, segwit reduces the overall cost of transactions by discounting witness data and increasing the capacity of the bitcoin blockchain. Secondly, segwit’s discount on witness data correcting a misalignment of incentives that may have inadvertently created more bloat in the UTXO set.((("", startref="segwit16")))