Crypto Academy Week 3 Homework Post for [@gbenga]

2개월 전



COURSE: All You Need to Know About Bitcoin Network


HOMEWORK TASK: Segwit Bitcoin Network or Legacy Bitcoin Network, which do you prefer and why?

Hello everyone. This is my homework task 3 entry for the above-stated course.

In this homework task, I'll be choosing between Legacy Bitcoin Network and Segwit Bitcoin Network after I must have expatiated on both of them. This homework task is based on my understanding of the course as taught by the professor and further research on the topic disscussed.



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By way of introduction, Segwit Bitcoin Network and Legacy Bitcoin Network are both types of bitcoin networks. Being a decentralized digital cash system, Bitcoin uses peer-to-peer networks to carry out its transactions. These transactions are done on a publicly distributed ledger (aka blockchain). Bitcoin, which is simply explained as digital cash, originally had several limitations on its operations, chief of which includes slow transactions and small block size.

In an attempt to address these limitations of Bitcoin, different solutions were proposed. One had to do with modifications on the blockchain and another involved a 'second-layer' network - an off-chain solution. Both are in force today, the former birthing the Segwit Bitcoin Network and the latter being the Bitcoin Lightning Network.


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Legacy Bitcoin Network is the original Bitcoin network that needed solutions due to its inherent limitations. At its inception, when Bitcoin had few users, Legacy was really cool stuff, with fast transactions and a block size that didn't seem to matter then. With time however, the flaws of Legacy came to limelight when scalability came calling.

Let me review the characteristics of Legacy Bitcoin Network to show why an increase in the number of bitcoin users became a poisoned chalice.


1. Decentralized:

Cool stuff! Legacy Bitcoin needn't an intermediary or a central authority to carry out its transactions as it was peer-to-peer. This eliminated those high transaction fees and censorship associated with central authorities and intermediaries.

2. Small block size:

Perhaps, the weak spot of Legacy Bitcoin Network. Legacy had a block size of just 1MB and from the lecture, this led to the blockchain limited to 5 - 7 transactions per second. When the number of users increased, this figure became unbearably low.

3. Unique address:

Legacy has a unique wallet address. You can easily identify it by the first character as Legacy's wallet addresses always begins with '1'

4. Widely supported:

More like the 'original Bitcoin', Legacy wallets address is supported by all exchanges and wallets since it's the original/first Bitcoin network wallet address. There's no concern for a Legacy wallet user as their wallet addresses are supported by all exchanges and wallets. This implies that they can transfer to and from their Legacy wallet address from and to other addresses respectively.


I earlier mentioned that Legacy was really cool stuff when it began, up until when scalability exposed some unbearable flaws inherent in it.

Fine, Legacy was decentralized, had a unique wallet address, and was widely supported but these didn't matter because with an increase in the number of users (scalability) came an increase in the number of transactions.

Recall that Legacy has a small block size of 1MB max, which limited transactions on the blockchain to just 5 - 7 per second.

With time, 5 - 7 transactions per second became slow as the number of transactions on Bitcoin increased.

This is easy to understand.

Consider a case where bitcoin had 10 users carrying out 7 transactions in a second. That means, users have their transactions completed in about 1 second.

Then consider an increase in the number of users to 10,000 carrying out 7,000 transactions in a second. That means some users might have to wait for about 1000 seconds before their transaction could be completed. That's over 16 mins for a transaction. Phew.

So, for 100,000 active bitcoin users carrying out about 70,000 transactions in a second, some users might have to wait for 10,000 seconds which is nearly 3 hours. Oh dear!

If only the number of transactions per second could increase just like the number of Bitcoin users.

Now this brings us to Segwit Bitcoin Network


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Segwit is short for Segregated witness. This was thought up by a smart guy who figured out that 65% of each block on the Bitcoin blockchain was occupied by signatures. "Well, the transaction block mustn't contain the signatures, so let's free up some space" he thought.

When the signatures were removed, the transaction block could hold more transactions. How? Let's see.

If 65% of the block was signatures, then, transaction data was 35%

35% ~ 1MB of data as we said earlier

Now, with signatures removed, transaction data could use up 100%, which is about

100% x 1MB/35% = 2.86MB

Segwit must have either included a little more optimization or the signatures took up more space than was first thought, because Segwit Bitcoin Network blocks can hold up to 4MB of transaction data.

Amazing isn't it? Well, so is the guy who thought it all out.

Now, let's see more about Segwit Bitcoin Network


Block size:

Yes, I had to start with the fun part. Unlike Legacy's 1 megabyte of transaction data, Segwit can allow up to 4 megabytes of transaction data. This meant that more transactions could be recorded in a block and also, more transactions could be carried in a second.

Unique address:

Segwit also has unique wallet addresses. You can easily identify a Segwit Bitcoin Network's wallet address as they usually start with '3' for Nested Segwit and 'bc1' for Native Segwit


Segwit Bitcoin network is also decentralized. It's Bitcoin only that it's faster as it reduces the load on each block of the Bitcoin blockchain. Being decentralized, it is independent of intermediaries and central authorities and free from all their troubles as it utilizes the peer-to-peer system.

Block segregation:

This is why it is Segwit. Segwit separates the signatures of witnesses from the transaction block, thereby reducing the load on the block, enabling the block to accomodate more transaction data. This was a blockchain solution to the inherent problem of low throughput in Legacy.

Widely supported:

Need I tell you that wherever Legacy is supported, Segwit is too? Of course, who would support a better version? Well, maybe you but exchanges and wallets do. Segwit is widely supported as it's a Bitcoin network that offers faster transactions at reduced cost.

Reduced cost:

I mentioned this just a while ago. Segwit offers reduced transaction cost. This is probably because as it accommodates more transactions in a block, the same transaction cost per block as with Legacy, is shared among the increased number of transaction. This means a reduced amount per transaction. This explanation is my own insinuation.

Transaction malleability fixes:

Whenever transactions in a block are verified, they are hashed and added to the chain. This hash is calculated using both the transaction and the signatures (the only thing that can be changed). With Segwit, the signatures are separated from the transaction and so the hash is based solely on the transaction. This makes the transaction data unchangable.


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In simple language, I prefer Segwit because it's an upgrade on Legacy.

I've expatiated both Legacy and Segwit, showing the flaws of Legacy and the fixes done by Segwit. Being a later network than Legacy (ie. it was created after Legacy), Segwit can be considered an upgrade on Legacy and this is why I prefer it to Legacy.

Segwit has also had an upgrade, which leaves us with two types of Segwit Bitcoin Network - Nested and Native. I mentioned them while talking about Segwit's unique address.

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Bitcoin's original network - Legacy, had an inherent problem of low throughput. This was exposed when more user began to adopt Bitcoin. Different solutions were suggested, among which was segregating the signatures of witnesses from the transaction data in each block thereby freeing up space for more transaction data. This was an blockchain solution and it fixed both the low throughput and also transaction malleability.

This blockchain solution which involved segregating the signatures of witnesses from transaction data, was named Segwit Bitcoin Network and is an upgrade to the original network - Legacy Bitcoin Network. I prefer Segwit because it's an unpgrade on Legacy.

Thanks for reading.
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Hi @jehoshua-shey, thanks for participating in this class, and for doing justice to the two Bitcoin Blockchain Network.

Question: Segwit has really brought about a change to the effective capacity of the block (Legacy) but then we know that the Bitcoin scalability problem will one day become very visible and a fork would be needed. Do you think Segwit2x protocol is a solution or Lightning network can help reduce Bitcoin load thereby helping scalabilty?

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Hi @gbenga

Segwit seems to offer some respite for now but with time the scalability of Segwit will be put to test. It's my opinion that if and when Segwit is outwitted we might just have to settle for that off-chain second layer solution which is the Lightning network.


You have made a very solid point. Lightning network might be the solution to the problem of Bitcoin scalability but then, Will it not be centralized since most lightning networks are handled by centralized exchanges?


One thing is certain, on the main bitcoin blockchain, there may not be anything to segregate from the block. This implies that there may not be an on-chain solution so every attention will most likely be focused on second-layer solutions.

If lightning networks seem to be centralized, I think with the advancements in crypto technology, a decentralized second-layer network can be possible or don't you think so?