What is Taproot and how will it benefit Bitcoin? Technology has been growing across the world and, likewise, lives are witnessing the digital revolution around them. Taproot is an upgrade for the Bitcoin network which was implemented on November 14, 2021. It is said to be one of the most anticipated technological upgrades to the Bitcoin network ever since the introduction of SegWit.
The aim of the Taproot is to revolutionize the way scripts of Bitcoin operate in an order to enhance privacy, scalability, and security. All of these are made possible by adjoining Taproot with a related upgrade known as Schnorr signatures.
Those who know about the cryptocurrency community are aware of privacy, scalability, and security issues. Bitcoin is said to be the most popular cryptocurrency in the world. However, these issues are still required to be addressed. Taproot aims to address these issues.
Introduction
Indeed Bitcoin has faced several challenges. However, it has been proven to be a platform that keeps the crypto-verse in a firm position. Irrespective of the concerns that have appeared for over the years, the crypto community has maintained its faith in Bitcoin.
However, there remain several issues that can’t be overlooked. One of these issues is related to its privacy. While Bitcoin is a public blockchain, an individual is allowed to monitor the transactions occurring on the network. For some, it turned out to be a major concern.
Although it is possible to increase anonymity with the help of techniques, including coin mixing and CoinJoins, none of these led to making Bitcoin a private currency. Well, the same can’t be said for the Taproot either. It may also help increase the anonymity on the blockchain network.
Taproot has been anticipated as one of the major initiatives toward solving the issue of privacy on Bitcoin and other issues. Last year, Taproot was activated on the Bitcoin network following approval from miners across the world.
Sounds interesting? Let’s have a look at it even more briefly. But before we start explaining the Taproot, let’s understand the limitations of the Bitcoin network.
Bitcoin network limitations
Although Bitcoin is the first and most prominent cryptocurrency across the world, it has several limitations in certain areas. These include slow transaction speed. Initially, the Bitcoin network was created in an order to process 7 transactions per second. However, the transaction speed and charges continued to rise as the network started growing in terms of popularity and users.
The average transaction fees of the Bitcoin network hit an all-time high of over $60 last year following the increase in the coin’s price. Experts believe that the costly charges and slow transaction speed are dragging the development of the Bitcoin network.
In an order to improve the transaction’s potential, the developers started implementing the Segregated Witness (SegWit) upgrade, back in 2017, to adjoin more transactions in one block. However, the costly transaction charges seemed to prevail.
Another major limitation of Bitcoin was its privacy. While it is clearly mentioned that Bitcoin’s transactions are private and all transactions on the Bitcoin network are visible, an individual can potentially know about anyone’s buying history by simply looking up their Bitcoin address.
In an order to deal with the limitations, the Bitcoin network has been doing upgrades to its network from time to time. However, the upgradation of the Bitcoin network has been challenging because of its decentralized nature. A single person is not allowed to decide what changes should or should not be implemented, instead, a community decides on the blockchain-based Bitcoin by achieving consensus.
What is the Taproot upgrade of Bitcoin?
The Taproot upgrade of Bitcoin is a soft fork that enhanced the scripts of Bitcoin to increase its privacy, efficiency, and ability to process smart contracts. It is said to be the most significant upgrade of the Bitcoin network since 2017 when the network tried the SegWit upgrade.
The Taproot upgrade included 3 different Bitcoin Improvement Proposals (BIP). These included Taproot, Tapescript, and the new digital signature scheme, known as Schnorr signatures. It aims to provide several benefits to Bitcoin participants, including improved privacy related to transactions and lower transaction charges.
It also enables Bitcoin to process more complex transactions and expand its use cases to compete with Ethereum, especially supporting the Decentralized Finance (DeFi) and non-fungible token (NFT) on the network.
Notably, the proposal for the Taproot upgrade was first unveiled by the Bitcoin Core developer Greg Maxwell in January 2018. Later in October 2020, Taproot was included in the Bitcoin Core library following a request for pull which was created by Pieter Wuille.
In an order to deploy the upgrade, the node operators were to adopt Taproot’s new consensus rules. Eventually, the Taproot upgrade received assistance from 90 percent of miners.
How does Taproot work?
There are 3 Bitcoin Improvement Proposals that work together to achieve the Taproot. These BIPs affect and compliment each other in different ways.
– Schnorr Signatures: It facilitates an enhanced and more secure way to validate the transactions on the Bitcoin network. It includes a cryptographic signature scheme which was developed by German mathematician and cryptographer Claus Schnorr. Although Schnorr had his algorithm protected for several years, the patent of the algorithm officially expired in 2008.
Among several benefits of Schnorr signatures are simplicity and efficiency in an order to generate short signatures. The main advantage of the Schnorr signatures is their potential to take multiple keys inside a complex Bitcoin transaction besides producing a single unique signature.
With this, the signatures from the multiple parties which are involved in the transaction may be “aggregated” in a single Schnorr signature, which is also known as signature aggregation.
– Taproot: Established on the SegWit upgrade in 2017, the Taproot uses the Merkelized Alternative Script Tree (MAST) in an order to increase the amount of transaction data on the Bitcoin blockchain. Each transaction on the Bitcoin network is secured by public and private keys.
In an order to spend the digital asset in a wallet, an individual is required to provide a signature to show that they are the real owner. Besides, an individual may also use other features to make Bitcoin transactions more complex. These include timelock releases, and multi-signature requirements, among others.
– Tapescript: It is said to be a coding language upgrade to the Bitcoin Script. It aims to make way for the 2 other BIPs. Tapescript is referred to as a collection of codes, and transaction instructions. While there is more space available in the blocks, Tapescript is expected to provide more flexibility for new features besides helping the Bitcoin network to create smart contracts in the future.
How does Taproot benefit Bitcoin?
Taproot brings along major enhancements to the areas of concern for Bitcoin. These include privacy and its use cases. Other benefits include:
– Enhance network scalability and reduce the amount of data, to be transferred or stored on the blockchain technology;
– Improve transactions per block (higher TPS rate);
– Lower transaction charges.
Other benefits include signatures no longer being malleable, which was said to be a security risk in the Bitcoin network.
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