How does Segwit reduce transaction fees?

[GetOutOfMyLife]

Sorry if it seems like quite the noobish question, I've heard a lot about Segwit, but very little about how it works exactly, what the difference between Segwit and Legacy addresses are, and how Segwit leads to reduced transaction sizes and fees.

Could anybody more knowledgeable than me please give me a basic explanation, it will be much appreciated as I plan to switch to a segwit address ASAP as these fees are horrific.

[mensha]

As they have planed, after the Segwit, size of a block will be reduced. In blockchain architecture, when the block size is reduced, verification time will be less and required resources may reduce. With these consideration transaction fees may reduce.

[darkangel11]

Googling is quite easy OP, you should try it

Segregated witness (segwit) is a soft fork that, if activated, will allow transaction-producing software to separate (segregate) transaction signatures (witnesses) from the part of the data in a transaction that is covered by the txid.

In other words it removes some data from the transaction making it smaller in size and cheaper to send. It's a very nice improvement. Many people have already switched to a segwit address (it begins with a 3 instead of 1).

[Anti-Cen]

As they have planed, after the Segwit, size of a block will be reduced. In blockchain architecture, when the block size is reduced, verification time will be less and required resources may reduce. With these consideration transaction fees may reduce.

They are selling us seats on a bumpy old dirty bus and limiting the number of seats available and the only resource here is the size of
the block, seats on the bus that are selling for silly prices and they love it

Segwit is now running on the nodes but they have done it in such a way that your BTC public address needs changing
(Bingo another $30 for miners) and the wallets and exchanges need a redesign too because it buys our miners more time

Instead of waiting for Segwit the bus company could add one line of code to stop the rip-off fees

public static money MaxFee =1.50 //20,000 miners is 19,000 too many so they are free to leave

The Bitcoin cartel can learn that we have to queue up at bus stops, rich bastards jumping the queue will lead to riots at these rate

[realcrypto]

In reality I have observed that the more the fork the more we have delay in transaction and the higher the transaction charges. If you look back when there was no segwit the transaction fees was not much compare to the transaction fee after several fork.

[princesocapuyo]

Reduces the size of the transaction which means less fees.

[FrueGreads]

In reality I have observed that the more the fork the more we have delay in transaction and the higher the transaction charges. If you look back when there was no segwit the transaction fees was not much compare to the transaction fee after several fork.

But those two things are not related at all. In fact most people are still not using segwit, and that's the reason why fees are still increasing. We have a solution out there, that would help the current situation, but big exchanges like coinbase/gdax and gemini still don't use it. In fact they do even worse and they don't batch their transactions, which makes them responsible for making a huge number of transaction on the blockchain that could easily be condensed, and lower the fees drastically.

So please don't get confused here. Segwit is a good thing, it's simply not being used yet, and that's why you are not seeing any reduction on the fees yet.

[Anti-Cen]

But those two things are not related at all. In fact most people are still not using segwit, and that's the reason why fees are still increasing. We have a solution out there, that would help the current situation, but big exchanges like coinbase/gdax and gemini still don't use it. In fact they do even worse and they don't batch their transactions, which makes them responsible for making a huge number of transaction on the blockchain that could easily be condensed, and lower the fees drastically.

So please don't get confused here. Segwit is a good thing, it's simply not being used yet, and that's why you are not seeing any reduction on the fees yet.

Maybe it's a bit of an inside job and when I've changed a back-end database before now i didn't have to change the Urls or tell people that they need a new browser

from a technical standpoint no one has told me why the addresses needed (1 becomes a 3) to be changed or what else must be needed
from the wallet so that it will fit in to the block-chain as a segwit transaction but I know the miners are loving the income
and I know that we are being mislead about Lightning 

Development team needs to just tell the miners that the maximum fee is $1.50 and if they don't like it then push off  because we have 19,000 more than we
need but i am sure they will have some clap trap reason not to do just that which would involve quantum physics or something stupid

[Mike Mayor]

For me I noted a small reduction in fees using SigWit. Not much though. I hear up to 80% off more like the other way around so it's 80% of total cost. I manage to get 30% off normal method. Oh well it's money saved. Money saved is money earned especially when that money is bitcoins.

[Anti-Cen]

For me I noted a small reduction in fees using SigWit.

Tell me why am I not surprised to hear that and thanks for letting us know so hope you recover it out of the fees
you had to spend to convert it in the first place.

[squatter]

Sorry if it seems like quite the noobish question, I've heard a lot about Segwit, but very little about how it works exactly, what the difference between Segwit and Legacy addresses are, and how Segwit leads to reduced transaction sizes and fees.

"Segregated Witness" was a soft fork feature that added new types of outputs and transactions. Native Segwit addresses start with "bc1" rather than "1xx." Segwit transactions segregate signature data, moving it outside of conventional blocks and creating a parallel chain for witness data. This saves considerable space against the original block size limit. As such, the space allowed for [Block + Witness data] was expanded from a 1MB block size limit to a 4MB block weight limit. Segwit transactions are "discounted" by the cost of data moved outside of legacy-style blocks. Right now, that amounts to ~2x savings in practice, more or less.

Could anybody more knowledgeable than me please give me a basic explanation, it will be much appreciated as I plan to switch to a segwit address ASAP as these fees are horrific.

While I do recommend upgrading to Segwit, keep in mind that it was just a small linear bump in transaction capacity. You might save ~50% in fees by using a Segwit wallet, but that's it. It doesn't solve the exponential scaling problem. Lightning will hopefully result in much lower fees for the currency/payment layer.

[Anti-Cen]

While I do recommend upgrading to Segwit, keep in mind that it was just a small linear bump in transaction capacity. You might save ~50% in fees by using a Segwit wallet, but that's it. It doesn't solve the exponential scaling problem. Lightning will hopefully result in much lower fees for the currency/payment layer.

Someone posted somewhere here today that he was expecting to save about 80% by switching to Segwit
but it was closer to 20% but when it comes to Lightning you might like to see my research on the subject
See https://bitcointalk.org/index.php?topic=2776719.msg28395400#msg28395400

I will do part two later in a week time but yes both myself and others are saying that hubs are banks
and the miners that could not control themselves who brought us $30-55 in fess will be hosting these
banks because they were in early on BTC so will have the Bitcoins to load up the channels for the banks

[Anti-Cen]

Could anybody more knowledgeable than me please give me a basic explanation, it will be much appreciated as I plan to switch to a segwit address ASAP as these fees are horrific.

I agree but I read today that Segwit fees don't add up to much saving and remember very few exchanges will work with Segwit
plus the conversion of the address can cost you $30.00 Time we all started screaming in other web-sited on the internet I thinks

[GetOutOfMyLife]

Sorry if it seems like quite the noobish question, I've heard a lot about Segwit, but very little about how it works exactly, what the difference between Segwit and Legacy addresses are, and how Segwit leads to reduced transaction sizes and fees.

"Segregated Witness" was a soft fork feature that added new types of outputs and transactions. Native Segwit addresses start with "bc1" rather than "1xx." Segwit transactions segregate signature data, moving it outside of conventional blocks and creating a parallel chain for witness data. This saves considerable space against the original block size limit. As such, the space allowed for [Block + Witness data] was expanded from a 1MB block size limit to a 4MB block weight limit. Segwit transactions are "discounted" by the cost of data moved outside of legacy-style blocks. Right now, that amounts to ~2x savings in practice, more or less.

Could anybody more knowledgeable than me please give me a basic explanation, it will be much appreciated as I plan to switch to a segwit address ASAP as these fees are horrific.

While I do recommend upgrading to Segwit, keep in mind that it was just a small linear bump in transaction capacity. You might save ~50% in fees by using a Segwit wallet, but that's it. It doesn't solve the exponential scaling problem. Lightning will hopefully result in much lower fees for the currency/payment layer.

An excellent response, and very well phrased. Is Segwit optimized? E.g. Is the amount of information that is moved out of the block the maximum possible amount, hence no further improvements can be made using this mechanism? Or is it possible to segregate the data multiple times?

[stompix]

As they have planed, after the Segwit, size of a block will be reduced.

No, the block size will not be reduced.

In blockchain architecture, when the block size is reduced, verification time will be less

As per above since block size is not going to be reduced there will be no impact on he verification time

verification time will be less and required resources may reduce

There are no required "resources" that are needed, we don't use cyanide for mining blocks.

With these consideration transaction fees may reduce.

If it where for your logic and your example , the transaction fee would just increase.

Someone posted somewhere here today that he was expecting to save about 80% by switching to Segwit
but it was closer to 20% but when it comes to Lightning you might like to see my research on the subject
See https://bitcointalk.org/index.php?topic=2776719.msg28395400#msg28395400

I'm pretty sure that if you would know this "person" and this person would be real, you would have also posted the tx fee to make your point. But, since 99% of what you're doing here is just FUD I'm sure that, as always , you have no real proof to back your lunatic claims.

[Anti-Cen]

I'm pretty sure that if you would know this "person" and this person would be real, you would have also posted the tx fee to make your point. But, since 99% of what you're doing here is just FUD I'm sure that, as always , you have no real proof to back your lunatic claims.

Your the "lunatic" with your nose up someones bum because you will say anything to try to keep the
price of your gambling tokens up so look for it yourself and go FUD yourself unless you would like to
pledge me a payment of $20.00 for finding it for you.

Put your money where your gob is

[Neconic]

Yes, it reduces the transaction fee somehow, I didn't research it in detail myself. But with modern payments for transactions of bitcoin - that's a very important part and a necessary one.

[squatter]

Sorry if it seems like quite the noobish question, I've heard a lot about Segwit, but very little about how it works exactly, what the difference between Segwit and Legacy addresses are, and how Segwit leads to reduced transaction sizes and fees.

"Segregated Witness" was a soft fork feature that added new types of outputs and transactions. Native Segwit addresses start with "bc1" rather than "1xx." Segwit transactions segregate signature data, moving it outside of conventional blocks and creating a parallel chain for witness data. This saves considerable space against the original block size limit. As such, the space allowed for [Block + Witness data] was expanded from a 1MB block size limit to a 4MB block weight limit. Segwit transactions are "discounted" by the cost of data moved outside of legacy-style blocks. Right now, that amounts to ~2x savings in practice, more or less.

Could anybody more knowledgeable than me please give me a basic explanation, it will be much appreciated as I plan to switch to a segwit address ASAP as these fees are horrific.

While I do recommend upgrading to Segwit, keep in mind that it was just a small linear bump in transaction capacity. You might save ~50% in fees by using a Segwit wallet, but that's it. It doesn't solve the exponential scaling problem. Lightning will hopefully result in much lower fees for the currency/payment layer.

An excellent response, and very well phrased. Is Segwit optimized? E.g. Is the amount of information that is moved out of the block the maximum possible amount, hence no further improvements can be made using this mechanism? Or is it possible to segregate the data multiple times?

We can increase the 4MB block weight (but not the legacy 1MB block size) with an additional soft fork. And we could discount the data (fees) in proportion to the block weight increase, like we did with Segwit. So we can potentially move a lot more signature data outside of legacy blocks.

But that kind of consensus change doesn't come without risks. I think conservative bitcoiners will want to see evidence that > 4MB blocks are safe and won't greatly harm the network before they'd support that.

Ideally, we're looking at a multi-faceted approach. Most of the transactions volume will hopefully move to upper layer protocols like Lightning, sidechains, etc. New features like signature aggregation will trim the fat from on-chain transactions. And eventually we can think about another block size/weight increase.

[eaLiTy]

In reality I have observed that the more the fork the more we have delay in transaction and the higher the transaction charges. If you look back when there was no segwit the transaction fees was not much compare to the transaction fee after several fork.

That is a funny observation,the reason we had these forks is to reduce the transaction delays,you have to understand the number transaction increased considerably from what it was a couple of years ago and so is the reason you feel like the transaction fees started increasing after the fork,in theory it would solve all the issues we have when it comes to scaling and it enables the lightening network to be activated.

[streetlight]

As far I know a fork does not have any impact on the orginal blockchain.