Taproot – an upgrade to the Bitcoin network went live on Nov 14, 2021.
It is the first successful upgrade after four years of attempts to upgrade the network resulted in a split in Bitcoin Cash.
In this post, I will tell you all you need to know about Taproot and how it affects the Bitcoin network.
Continue reading for more information.
Post Summary
This is what I will cover:
- What is Bitcoin Taproot?
- The Three BIPs Of Taproot
- 3 Benefits Of The Bitcoin Taproot Upgrade
- How Will The Bitcoin Taproot Affect Bitcoin’s Future?
- Conclusion
I am going to break each section down so that even the least technical person can understand it. Technical terms were also omitted.
Let’s get started!
(1) What is Bitcoin Taproot?
Taproot is a soft fork update to the bitcoin network.
A “soft fork” means that the Bitcoin network was upgraded without splitting into two blockchains.
It is the latest version of the Bitcoin blockchain, dubbed Bitcoin Core, 21.1.
Greg Maxwell first proposed this idea in 2018 as “Taproot: a privacy-preserving switchable scripting”
In October 2020, it was written and incorporated into Bitcoin Core by Pieter Wuille, alongside Tim Ruffing, A.J. Townes, and Jonas Nick.
Taproot is now reckoned as the most successful upgrade to the bitcoin network.
It received a lot of support from the bitcoin community, with up to 90% of miners supporting it up during a “Speedy Trial” in June 2021.
On November 14, 2021, Taproot went live on the Bitcoin blockchain, after F2Pool, one of the largest bitcoin mining pools, mined block 709,632.
The Taproot upgrade comprises three important updates to the “Bitcoin Improvement Proposals,” which are BIP 340, 341, and 342.
These three updates are collectively called the BIP Taproot.
In the next section, we will talk about the three BIPs of Taproot in detail.
(2) The Three BIPs Of Taproot
Take a quick peek!
1. BIP 340
Before Taproot, the Bitcoin network used the elliptic curve signature algorithm.
However, what BIP 340 introduced is a switch to the Schnoor signature.
Schnoor is a digital signature algorithm invented in the 1980s by a German man, Claus-Peter Schnorr.
Unlike the former, Schnoor offers the bitcoin network more benefits.
It provides a simpler and more efficient signature that is both private and invulnerable to security risks.
Significantly, Schnorr will aggregate all bitcoin public addresses, including, complex and multiple-signature addresses, into one single, indistinguishable address.
3. BIP 341
This BIP is referred to as Taproot, and it focuses on how to implement the Schnoor signature into the bitcoin network.
It proposes the use of Merkelized Alternative Script Trees (MAST) to achieve this.
MAST is a cryptographic algorithm that allows the size of data in a block to be reduced.
It was earlier proposed to the bitcoin community as BIP II4 and BIP 166.
Before the Taproot upgrade, the bitcoin network requires that all data associated with a transaction be revealed on the blockchain.
This takes up a lot of block space, which results in a long confirmation time.
With MAST, however, only the data that is spent is revealed, taking up less space and enhancing transaction confirmation.
3. BIP 342
This BIP is concerned with Tapscript, the upgrade made to the Bitcoin script.
The Bitcoin Script is a set of codes that specify how bitcoin should be spent. You can also see it as a Bitcoin programming language.
The Legacy Script and Segwit Script are two previous bitcoin scripts.
“BIP 342” upgrades the bitcoin script so that it can accommodate the Schnoor signature (BIP 340) as well as Taproot (BIP 341).
For instance, instead of the Elliptic Curve signature, the new code will now allow transactions to be verified using the Schnoor signature.
Additionally, the upgrade also adds new functionality to the bitcoin network that allows it to handle smart contracts.
The importance of the Taproot upgrade is that it offers three benefits to bitcoin which will be discussed in the next section.
Continue reading!
(3) 3 Benefits Of The Bitcoin Taproot Upgrade
The Taproot upgrade provides the bitcoin blockchain with three significant benefits: smart contracts, privacy, and low fees.
1. Privacy And Security
The Schnoor signature unlocks the privacy of bitcoin transactions.
Although “bitcoin mixers” allow transactions on the bitcoin network to be hidden, bitcoin was never considered a privacy coin until the Taproot upgrade.
This is accomplished by aggregating public wallet addresses, making them simpler and extremely difficult to trace.
Now, let me explain this in the simplest possible terms.
Before Taproot, public addresses for transactions on the bitcoin network varied in different formats.
Anyone can easily distinguish between transactions from a single public address, a multisig address, and even the lightning network using the bitcoin explorer.
Taproot, on the other hand, merges all of these wallet addresses into a single sort of address.
As a result, anyone monitoring a transaction can see that the transaction has occurred, but will not be able to decipher where the transaction originated.
Aside from addressing the issue of privacy, Schnoor also solves the issue of bitcoin’s double-spending and malleability.
2. Low Fees
The third benefit of Taproot is that it streamlines the transaction costs on the bitcoin blockchain.
With the upgrade, each bitcoin transaction will use fewer bytes, which allows for more transactions to fit into a block on the blockchain.
For instance, before the upgrade, the multisig wallet used a lot of bytes.
A “3 of 5 multisig wallets” requires three signatures and five public keys, which are revealed on the bitcoin blockchain. This takes up space on the blockchain.
Taproot makes transactions on the network much simpler, making it possible for more transactions to be fit into one block.
Hence, with more transactions confirmed at the same time, low congestion and transaction fees can only be expected.
3. Smart Contracts
Smart contracts were introduced to the blockchain with the release of the Ethereum blockchain.
They are written programs that self-execute when the conditions that underlie them are met.
Additionally, smart contracts make it possible for DApps and Defi to be hosted on the blockchain network.
While the previous version of the Bitcoin network was not smart contract compatible.
Taproot unlocks the potential of smart contracts on the Bitcoin network.
What’s more, it makes it even easier for anyone to build smart contracts.
However, they might not be as advanced as those on Ethereum, Solana, and other smart contract blockchains.
Keep reading!
(4) How Will The Bitcoin Taproot Affect Bitcoin’s Future?
From the looks of things, Taproot is expected to bring about lots of positive changes to Bitcoin’s network.
These changes are highly anticipated and will usher in a new wave for the bitcoin network.
Slow transaction time and high gas fees are the major challenges that face bitcoin.
It is, in fact, something that has been a bottleneck to Bitcoin’s adoption.
But with faster transactions, this will propel Bitcoin as an ideal and scalable blockchain that will continue to gain traction in the future.
Gladly, the upgrade has also made it easier for developers to create smart contracts using the most secure tools.
Furthermore, some experts already speculate that the upgrade will lead to a long-term bullish trend in the price of Bitcoin.
Investorplace, for example, published an article with the headline that BTC will hit $90k following the upgrade.
Note, however, that this is only speculation and that the BTC price has not done notably well since the upgrade, Nov 28, 2021.
Another thing is that, while bitcoin has upgraded to Taproot, it may take some time for it to be fully implemented.
This is because all miners need to upgrade their nodes and wallet developers will also need to write new code that accepts Taproot transactions.
This is most likely why the upgrade hasn’t yet affected the price of BTC.
All the same, Taproot will set the pace for bitcoin in the future.
Heads up!!
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Conclusion
We will wrap up the Bitcoin Taproot post here.
I hope you found the information in this article helpful.
Taproot is a well supported Bitcoin soft fork that is expected to kick off a new phase of development in the Bitcoin space.
The upgrade not only improves the network but also provides investors with enhanced security, lower transaction fees, and smart contract capability.
It is always fascinating to hear about a new development in the bitcoin space.
So, what do you think about this upgrade?
Do you believe it will lead to a long-term bullish trend in the price of BTC?
Put your thoughts in the comment section below.
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