SegWit (Segregated Witness)

SegWit, short for segregated witness, is a Bitcoin protocol upgrade activated in August 2017 that moves the witness data — the signatures proving a transaction is authorised — out of the part of the transaction used to compute its identifier. It was deployed as a soft fork, so nodes that never upgraded continued to follow the chain. Two consequences matter. The first is that transaction malleability was fixed: before SegWit, a third party could alter a signature's encoding and change a transaction's identifier without invalidating it, which made any protocol building on unconfirmed transaction identifiers fragile. Removing that obstacle is what made payment channels, and therefore Lightning, practical. The second is capacity. SegWit replaced the flat block size limit with a weight measure that discounts witness data, so a block holds meaningfully more transactions than before, and a transaction spending SegWit outputs is cheaper to send than an equivalent legacy one. That is why the choice shows up on your bill: exchanges and wallets that use native segwit addresses, the ones beginning bc1q, generally pay lower fees than those still spending legacy outputs, and some pass the difference on. Compatibility is the practical caveat. Nearly everything now accepts bc1 addresses, but a small number of older services still do not, which is worth checking once before a large withdrawal rather than after.