After the Scaling Bitcoin conference in Hong Kong in early December, Bitcoin Core committer Gregory Maxwell put forward a proposal to work immediately on a soft-fork with a ‘segregated witness”-based 4 MB block increase. At the moment, 31 core developers have signed the proposal, including original Bitcoin Core committers Maxwell, Pieter Wuille, and Wladimir J. van der Laan.
The backers of Maxwell’s proposal believe there are fundamental trade offs between scale and decentralization with the available technology. Maxwell indicates that if the bitcoin network becomes to costly for users, they will forced to trust third parties rather than enforce network’s rules. If the blockchain’s resource usage is too high, bitcoin loses its competitive edge over legacy systems because validation will become too costly, pricing out many users and forcing trust back into the system. One of bitcoin’s major advantages is that it is a trustless system. But if the status quo is maintained, the capacity of the network is too low, methods of transacting are too inefficient, and access to the blockchain for dispute resolution will become too costly, also pushing trust back into the system.
Maxwell seeks to achieve increased capacity of the bitcoin network without the trade-offs to security or decentralization. His proposal is based on what Wuille presented at the Scaling Bitcoin conference in Hong Kong, adding “segregated witness” to bitcoin. The term “witness” refers to the signatures inside bitcoin transactions, which account for 60% of the data on the blockchain. Wuille proposed increasing bitcoin’s scalability and capacity by reorganizing data in blocks to handle signatures separately, taking them outside the scope of the current blocks size limit.
Maxwell included the “segregated witness” or “segwit” concept in his proposal to the Linux Foundation’s bitcoin development list, immediately after the conference:
I propose we work immediately towards the segwit 4MB block soft-fork which increases capacity and scalability, and recent speedups and incoming relay improvements make segwit a reasonable risk. BIP9 and segwit will also make further improvements easier and faster to deploy. We’ll continue to set the stage for non-bandwidth-increase-based scaling, while building additional tools that would make bandwidth increases safer long term. Further work will prepare Bitcoin for further increases, which will become possible when justified, while also providing the groundwork to make them justifiable.
Maxwell noted that separating out the signature data in the proposal permits new security models, with the elimination of downloading data and improved performance for lite clients, particularly those with high privacy. The segwit model also adds fraud proofs that make violations of the Bitcoin system provable, makes further enhancements safer, eliminates signature malleability issues.
Maxwell believes that if widely used the proposal will increase bitcoin capacity significantly:
If widely used this proposal gives a 2x capacity increase (more if multisig is widely used), but most importantly it makes that additional capacity–and future capacity beyond it–safer by increasing efficiency and allowing more trade-offs (in particular, you can use much less bandwidth in exchange for a strong non-partitioning assumption).
Notably absent from the list of signatures are two Bitcoin Core committers, Gavin Andresen, the author of BIP101 – the proposal with the biggest block size increase, and Jeff Garzik, the author of BIP100 and BIP102 – both more conservative proposals.
The 31 signatures will also mean little unless key participants of the the Bitcoin ecosystem, the mining pools and payment processors, adopt Maxwell’s soft-fork proposal and consensus is achieved.