Bitcoin is about to undergo a major overhaul thanks to Taproot. On the weekend of November 13th, 2021, a big update to Bitcoin went online, causing much excitement in the cryptocurrency world.
The name of the update is “Taproot,” and it is Bitcoin’s first major upgrade since 2017. For those who are unfamiliar with Taproot, what is it?
What Is Bitcoin’s Taproot Upgrade?
It was enabled on November 13th, 2014, in block number 709,632.
Even Twitter CEO Jack Dorsey tweeted about it, that’s how eager everyone was to see what would come of it.
Former Bitcoin developer Gregory Maxwell created Taproot in 2018.
In all, there are three enhancements to Bitcoin’s network, all of which center on “Schnorr signatures.” Schnorr signatures are cryptographic signature schemes that combine many “master signatures” into a single digital “signature.”
To unlock a public key with a single private key, Bitcoin employed the Elliptic Curve Digital Signature Algorithm (ECDSA).
But the notion of Schnorr signatures predates ECDSA mathematician and cryptographer Claus Schnorr, who owned a patent for the concept until it expired in 2008, came up with the idea.
A “soft fork” update on the blockchain, Taproot is backward compatible with prior versions of the protocol, which implies it is a protocol upgrade that is backward compatible.
Bitcoin’s blockchain will benefit greatly from the Taproot update as well, thanks to the addition of many significant new capabilities.
Benefits of Taproot Upgrade
1. Taproot Bitcoin Smart Contracts
Because of its scalable smart contracts, Ethereum is the most extensively utilized blockchain system for DeFi and NFT applications.
Due to its lack of smart contract capability, Bitcoin hasn’t been a popular option for developers who want to start DeFi applications.
With the Taproot update, the Bitcoin network will be able to execute more complicated smart contracts more quickly and at a far larger scale.
There is no way to expect Bitcoin to compete with Ethereum, Cardano, or any other prominent smart contract blockchains shortly.
Just because you see smart contract projects on such platforms doesn’t mean you will be able to handle them.
2. Enhanced Security & Privacy
Next, Taproot will work to improve Bitcoin’s anonymity.
It is well-known that Bitcoin transactions are very visible (hence the creation of privacy coins).
A public block explorer website may be used by anybody to find all the specifics of a Bitcoin block, including the transaction time, block weight, transaction fees, and even the identity of the miner who generated it.
Bitcoin public block records will show “master signatures” made using Schorr signatures as a typical, single transaction.
As a result, Bitcoin transactions will seem to be normal ECDSA transactions, allowing for greater privacy and anonymity for users.
3. Transaction Fees are reduced using Taproot Upgrade
Transaction costs for Bitcoin are very volatile. It presently charges an average of $2.50 for each transaction.
According to BitInfoCharts, it hit an all-time high of $62.78 in April 2021.
As a result of Schnorr signatures’ multi-signature functionality, Taproot expects transaction costs to remain low.
Transactions become more time and cost-effective when several signatures are combined into a single signature.
As a Wrap-Up,
Bitcoin’s price didn’t skyrocket when Taproot’s block supply was slashed in half. Because of its positive impact on the Bitcoin blockchain ecosystem, however, this development is worth keeping an eye on.
Segregated Witness or “SegWit” as Bitcoin’s most recent update, which doubled the block size limit on the Bitcoin network by eliminating signature data to free up room for additional transactions.
The post-SegWit age of Bitcoin has been dubbed “stagnant” by detractors.
With Ethereum’s EIP1559 protocol, it is seen as unable to keep up with new, fast-developing technologies, such as Bitcoin’s: