Bitcoin has been looking for ways to scale their network, so more transactions can be processed. Their proposed solution is called Segregated Witness. One of its innovations is speeding up and streamlining processing by separating signature data from transaction data.

This paves the way for a raft of improvements, making users’ wallets more secure and enabling second layer scaling solutions, to keep building out and improving the service. Unfortunately, commentators have also drawn attention to the fact that this change could cause problems with the US’ contract law. This could also become a global issue, as many banks are keenly incorporating some of Bitcoins tech solutions into their own online banking tools. If they continue to follow trail bitcoin has blazed without taking account of these issues, ordinary users could find themselves in trouble.

More companies and individuals are beginning to use Bitcoin, at least for some transactions, so there is more scope for problems affecting the currency to ripple out and affect the economy at large.

The problem is caused by the separation in transaction data (the value of what is sent) and the witness data (confirmation of the party sending and receiving). The Segregated Witness system has been built on the assumption that witness data is only needed to authenticate the transaction as it happens and it can then be discarded.

This is rather like signing an employment contract and then shredding everything but the signature page on your first day. If you, or anyone, wanted to refer to the contract again, all they could prove is that you and employer signed a contract: the terms, remuneration and all other details are lost.

If a transaction is disputed (and this is not unknown), it’s now near impossible to reconstruct the details that allow the disagreement to be mediated and resolved quickly and effectively. While Bitcoin are obviously confident that their network will be robust enough to deal any disputes or issues, their original white paper described the currency as “a chain of digital signatures” and choosing to break that chain in the name of increased scaling is a worrying development.

Bitcoins USP is that it is a highly secure crypto-currency, and so any developments that appear to threaten that security, or cast doubt that your Bitcoins can remain yours unchallenged is bound to make waves in the community.