Segregated Witness means that we are separating the witness from the transaction in order to make it smaller in size. The signature data, or witness, will still be transmitted, however it won’t be included inside of the transactions. Since most of the transaction are signature data, segwit most likely double the transaction capacity in bitcoin.
Segwit(Segregated Witness) replaces the block size limit with a new block cost limit, counting each byte of witness data as 1 unit of cost and UTXO transaction data as 4 units; as a result, the maximum size of a block becomes just under 4 MB.
However, blocks are not expected to consist entirely of witness data, so blocks near 4 MB in size would be unlikely.
According to some calculations performed by Anthony Towns, a block filled with standard single-signature P2PKH transactions would be about 1.6 MB and a block filled with 2-of-2 multi signature transactions would be about 2.0 MB.
Segwit biggest benefit is the Lightning Network. The Lightning Network(LN) is an off chain scalability option that can process millions-billions transactions per second.
Segwit also lets other bitcoin upgrades happen with soft forks. Some example are Schorr,Mast(both of those which also help LN), Confidential Transactions and more 🙂
We will talk about in this blog(along with linking it here by the time we write it).