Original title: "Viewpoint | SegWit and its successors: Taproot, UASF, and the Lightning Network" by SatoshiLabs
It is often said that Bitcoin resists change. In a way, that's true—Bitcoin developers are ridiculously conservative when it comes to protocol changes—but it's a bit of a narrow view: Bitcoin embraces change, but only those that make it Coins get better.
For Bitcoin to do what no technology has ever done before, to be a currency, it has to be invulnerable. Network downtime, block errors, overflow errors, and rounding errors cannot be tolerated. Bitcoin must remain stable: Any improvement or modification to the Bitcoin code could have catastrophic economic consequences, so it feels like walking on eggshells.
Link: Why is Bitcoin so conservatively developed? (Chinese translation)
We cannot endorse an upgrade proposal just because it may benefit some participants in the network. Bitcoin developers will never risk the fairness of the network unless it is for the benefit of all. This is about making Bitcoin more useful and accessible for everyone, rather than pursuing fancy features that only a small number of people will use.
Why is Segregated Witness (SegWit) so important?
Four years ago, on August 24, 2017, at block height 481824, the SegWit upgrade was activated. As described in Bitcoin Upgrade Proposals (BIP) 141 to 144, SegWit solves the malleability problem while also solving the scalability challenges caused by block size constraints.
At the time, even though SegWit had been added to the Bitcoin Core software’s code base, there was a heated debate about whether Bitcoin should accept it, exposing a tug-of-war for power between node operators and miners.
Link: An Internal Upgrade in the Bitcoin Mining Industry
For many reasons, many miners do not support SegWit and try to prevent this upgrade. But the foreseeable benefits eventually led users to push a user-activated soft fork (UASF). This is a coercive network upgrade, as nodes with UASF enabled will reject blocks from uncooperative miners. This is a historic moment for Bitcoin, which proves two points: the Bitcoin network is decentralized; miners serve users and cannot be reversed.
How SegWit works
The primary goal of SegWit is not to save block space, but to fix transaction indeterminate loopholes. Before SegWit is enabled, transaction IDs (txids) that have not yet been confirmed on-chain may change due to changes in included scripts or changes in the signature itself. SegWit transferred the script signature (ScriptSig) to a new part of the transaction "witness" (this part is not used to calculate the txid), the transaction's indeterminate vulnerability is fixed, and the transaction ID has become an identifier that unconfirmed transactions can rely on. This is extremely critical for the Lightning Network.
Link: Bitcoin address and how to use it
While this key upgrade makes transaction IDs reliable data, moving script and signature data into the Witness field has forced developers to come up with a new method of measuring transaction fees, namely, based on "block weight" instead of "block size" calculates the transaction fee (Translator's Note: The latter is measured by the size of the data volume, while the former designs a data volume multiplier for different types of data). Before SegWit was enabled, the block size was 1 million bytes (about 1 MB). After SegWit is enabled, the upper limit of the block size becomes 4 million weight, which is converted to an average of about 1.5 ~ 2.0 MB per block (depending on the transaction volume contained in the block), but it can accommodate up to 4 MB. data. This is because the weight ratio of witness data and other data in the transaction is 1:4, and more transactions can be inserted into the block, which will reduce the level of handling fees.
What we learned from SegWit
As a learning experience, SegWit taught us a lot about Bitcoin, both practically and philosophically. The SegWit upgrade saw a broad user base come out against greedy miners, forcing miners to upgrade by rejecting non-SegWit blocks. It takes advantage of Bitcoin’s game economics to reduce miners’ incentives—if their blocks will be rejected, they will not be able to reap block rewards and fees from them.
Nodes Hold Power
User-activated soft forks, as the name suggests, reflect the scope of power of nodes in this system. It is not miners who have invested a lot of capital to buy ASIC equipment and control huge computing power, but rather insignificant users who keep a copy of the Bitcoin ledger for verification. This was the strongest user-driven stress test of Bitcoin’s principles of decentralization, and it ended up having the desired effect, forcing miners to accept the fork.
The Segwit upgrade also had some side effects, such as the "block size war" that helped voice miners who opposed SegWit and supported block expansion. Presumably, miners reacted this way because they used a technology called "AsicBoost" to increase mining efficiency, but this technology is not compatible with SegWit.
This conflict has allowed us to see who the real supporters of Bitcoin are, and weeded out those who only want to change the network for their own self-interest. In the end, there were two consequences: some miners defected to the forked chain; the Bitcoin network also experienced a difficult and slow SegWit upgrade, which took more than a year to obtain 50% support.
Forks don’t have to end in disputes
For a long time, people didn't know how SegWit would end. Some nodes activated UASF against miners, creating an unexpected split in the community; without pressure from users, the upgrade might have gone differently, or not at all. Furthermore, these lessons were carried over to Bitcoin’s next upgrade, this year’s Taproort soft fork, which was recently locked in.
Link: What benefits does Taproot bring to hardware wallets?
Taproot's voting process is much more formal than SegWit's, and miners are encouraged to upgrade clients and signal support in blocks long before the expected activation time. Each block dug by a mining pool that expresses support is regarded as a vote to support activation. If more than 90% of the blocks are supported during the voting period, it means that the vote is passed.
This method puts the consensus of miners before users, avoiding fierce conflicts between ordinary nodes and miners due to differences of opinion. If the miners fail to reach a consensus on the Taproot upgrade before the end of the voting period, the call for UASF will undoubtedly resound throughout the community.
We can foresee that the same history will repeat itself in future network upgrades, but whether it will take the same approach as Taproot is unknown. If this process is standardized, it could be exploited by people with ulterior motives to ask miners to vote and provoke the UASF in situations that should be avoided.
lightning strikes
While the slow adoption of Segregated Witness has been disappointing, the benefits it offers are gradually being revealed. The Lightning Network is a second-tier network built on top of Bitcoin, and has been making headlines in major media over the past year. The Lightning Network offers instant, near-fee-free payment transactions guaranteed to settle on Bitcoin; thus, it makes Bitcoin more accessible and usable to the average person. When used properly, it can also provide better privacy.
Link: Your financial data has no privacy, see how Bitcoin solves this problem
Reliable instant payments would not be possible without SegWit; however, the door to new scenarios of this type has been opened due to the resolution of the transaction ambiguity problem mentioned above. There is already an instant payment layer and data routing layer on Bitcoin, and further computing processing layers can be built, such as smart contracts, decentralized applications, and private networks.
SegWit unlocks new capabilities for Bitcoin. As the Lightning Network grows, so will the new features it can provide. Over the past few years, altcoins have attempted to build many novel applications. Some of these more practical applications may be integrated into the Lightning Network-based computing layer and enjoy the security of Bitcoin. The activation of Taproot is a foregone conclusion, and it will be activated in November this year. Bitcoin will surely become more efficient and bring more innovations in the future. Stay tuned!
