Lightning, Atomic Swaps, and Taproot - A Legacy of SegWit
SegWit is a soft fork implemented to make transactions more efficient and to address the issue of transaction malleability. SegWit allows for Lightning and Atomic Swaps and improves Script.
SegWit stands for "Segregated Witness," meaning that parts of a transaction can be stored separately from the main part of the transaction. SegWit makes transactions more efficient by making it possible to store more data in a single block. This allows for more transactions to be processed per second, which reduces congestion on the network and lowers fees.
The transaction malleability issue was a bug that SegWit fixed that allowed transaction modification after broadcasting the transaction to the network. Transaction malleability could potentially allow someone to double-spend their coins. Fixing these issues enables several features, including:
- Lightning Network: SegWit allows for creating "payment channels" between two parties. These payment channels can be used to make near-instantaneous and low-cost payments without having to broadcast a transaction to the entire network.
- Atomic Swaps: SegWit also enables "Atomic Swap," which allows two different cryptocurrencies to be exchanged directly without needing a third-party exchange. This could potentially allow for more direct and efficient trading between cryptocurrencies like Bitcoin, Litecoin, and Dogecoin.
- Script Upgrades: SegWit also makes it possible to upgrade the script language, making it more flexible and powerful. This could enable new types of transactions, such as smart contracts, on the network. Taproot is a soft fork that was enabled on Bitcoin and Litecoin that allows for better scalability and privacy on the network. It does this by creating a new type of transaction, called a "tapscript", which can be used to create more complex scripts.