Segregated Witness (SegWit) is a Bitcoin transaction change that separates transaction signatures and scripts (witness data) from inputs and outputs data. Its main goal is to solve non-intentional transaction malleability and pave the way for Layer 2 Bitcoin scaling.
By separating the witness data, SegWit allows for more transactions to fit in a Bitcoin block, increasing throughput and reducing fees for users on the network.
Bech32 Addresses and Legacy Addresses
SegWit is accompanied by the Bech32 address standard. Bech32 addresses, also known as 'native SegWit' addresses, start with "bc1," while Legacy addresses start with "1". For example:
- Bech32: bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf5mdq
- Legacy: 157fRrqAKrDyGHr1Bx3yDxeMv8Rh45aUet
The Blockchain.com Wallet now defaults to SegWit (Bech32) receiving addresses. By receiving bitcoin to SegWit addresses, you'll enjoy lower fees when sending this bitcoin in the future. If you need to receive a transaction to a legacy address, please refer to this article for step-by-step instructions.
Lower transaction fees with SegWit
Benefits of SegWit include lower transaction fees when sending bitcoin. The fee rate is based on the transaction size in bytes, and SegWit reduces the effective size of a transaction.
To take advantage of the lower fees enabled by SegWit, you have to send bitcoin from a Bech32 address. Sending bitcoin from a Bech32 (native SegWit) address will require a lower fee compared to sending an equivalent transaction from a legacy (non-SegWit) address.
Managing your Bitcoin
Bitcoin previously received to Legacy addresses in your wallet will remain on those addresses until you send it. Moving bitcoin from Legacy to Bech32 addresses would incur transaction fees, making it impractical.
However, to help you benefit from SegWit's lower fees, any change from transactions sent from Legacy addresses will automatically be sent to a SegWit change address. As a result, your Bitcoin DeFi Wallet balance will gradually migrate to SegWit addresses over time as you send transactions and receive change to the SegWit address, and as you receive new transactions to SegWit addresses.
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