Segregated Witness, or SegWit, is the name used for a soft fork change in the transaction format of the cryptocurrency Bitcoin. It was invented by Pieter Wuille as a means to lower the Bitcoin block size and remedy the blockchain size limitation problem that reduces Bitcoin transaction speed.
Segregated Witness was formally proposed as "Bitcoin Improvement Proposal 141" (BIP141) on December 21, 2015, authored by Eric Lombrozo, Johnson Lau and Pieter Wuille. It was activated on Bitcoin on August 24, 2017 and it has been slowly increasing in use across the Bitcoin network. In October 2017, bitcoin transactions using SegWit were 10%.
The key idea of SegWit is that data related to signatures are removed from bitcoin transactions making them smaller in size.
In technical terms:
“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.”
To do this, SegWit splits each transaction into two segments, removing the unlocking signature ("witness" data) from the original block section and appending it as a separate structure at the end of the block. The original section would continue to hold the sender and receiver data, and the new "witness" structure would contain scripts and signatures. The original data segment would be counted normally, but the "witness" segment would, in effect, be counted as a quarter of its real size.
This essentially makes the blocks smaller, which in turn allows more transactions to be included in each SegWit block.
Prior to activation in Bitcoin, SegWit had been implemented on other cryptocurrencies such as Groestlcoin, Litecoin, DigiByte and Vertcoin.