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What is Transaction Witness Data?
Shailee Adinolfi
&
Annie Pei
General Wallet Use
Transaction witness data is a crucial element of Bitcoin transactions. It contains digital signatures and other components needed to verify a transaction is valid. By ensuring the sender has authorized the transaction, witness data helps to maintain the security and integrity of the Bitcoin blockchain.
What Is Witness Data?
Witness data is the verification information in a Bitcoin transaction that principally consists of digital signatures. The data “witnesses” the transaction and so proves that the sender has the right to spend the associated Bitcoins. It includes three main components.
Digital Signature: Confirms the sender’s ownership and authorization.
Public Key: Used to verify the digital signature.
Script Witness: Includes scripts required for transaction verification, like multisignature scripts.
Witness data was initially stored alongside transaction data, contributing to block size limitations. With the introduction of Segregated Witness (SegWit), witness data was moved to a separate structure, improving efficiency and scalability.
Transaction Witness Data Use Cases
Transaction witness data has significant applications in how Bitcoin transactions are stored, verified, and optimized.
Transaction Verification: Ensures the legitimacy of every Bitcoin transaction by verifying signatures.
Improved Block Efficiency: With SegWit, separating witness data allows more transactions to fit within a block.
Addressing Transaction Malleability: SegWit eliminates malleability issues by excluding witness data from the transaction ID (TXID).
Facilitating Layer 2 Solutions: SegWit enables technologies like the Lightning Network, which improves transaction speed and scalability.
Understanding Segregated Witness (SegWit)
Segregated Witness, or SegWit, is a protocol upgrade introduced in 2017 to address block size limitations and transaction malleability. SegWit makes Bitcoin transactions more efficient and secure by separating witness data from other transaction data.
The Transaction Malleability Problem
Before SegWit, Bitcoin transactions were vulnerable to malleability, by which the transaction ID (TXID) could be altered without changing the transaction. This caused issues including:
Double Spending: Malicious actors could alter TXID to exploit the system.
Wallet Confusion: Services relying on TXIDs for transaction tracking experienced errors.
Security Risks: The reliability of transaction verification was undermined.
How SegWit Addresses Transaction Malleability
SegWit solves transaction malleability by removing witness data from the transaction ID calculation. Here’s how:
Segregating Witness Data: Witness data is stored separately, so changes to it do not affect the TXID.
Fixed TXIDs: Once a transaction is broadcasted, its TXID remains unaltered, enhancing transaction reliability.
Supporting Layer 2 Solutions: SegWit enables advanced technologies like the Lightning Network and other Layer 2 solutions that scale Bitcoin’s capabilities.
How Does Witness Data Affect Users?
Witness data impacts several aspects of Bitcoin transactions.
Improved Transaction Efficiency: SegWit allows more transactions per block, speeding up confirmation times.
Lower Fees: Transactions with SegWit are more compact, reducing the size and cost of each transaction.
Enhanced Address Formats: Bech32 addresses (starting with “bc1”) support SegWit and are more efficient.
Wallet Compatibility: Users need SegWit-compatible wallets to take full advantage of lower fees and improved scalability.
Impact on Transactions
SegWit optimizes block space usage by separating witness data. More transactions fit into each block, which leads to faster processing times and lower fees.
Changes in Address Formats
The SegWit upgrade introduced Bech32 addresses. These addresses start with "bc1," are error-resistant, efficient, and support SegWit transactions. This reduces cost and improves user experience.
Wallet Compatibility
To utilize SegWit’s benefits, users need wallets that support the upgrade. Modern wallets like our own Leather are fully compatible with SegWit and Bech32 addresses, allowing users to send and receive transactions seamlessly while saving on fees.