A brief introduction to the latest Bitcoin upgrade Taproot and its potential cryptocurrency security and transaction benefits
Two issues eluding Bitcoin to this day are privacy and creating applications on the Bitcoin blockchain. This article will look at Taproot, the most significant upgrade to Bitcoin since 2017’s SegWit that aims to bring decentralized finance (DeFi) and smart contracts and another layer of privacy to the number one cryptocurrency in existence.
What is Taproot?
Taproot is an upgrade to Bitcoin that will bring several new features and benefits to the network. For example, one of the benefits of Taproot is an increase in privacy. Gregory Maxwell, former CTO and Co-Founder of Blockstream proposed Taproot in 2018. Taproot comprises three upgrades known as Bitcoin Improvement Proposals: Schnorr Signatures, Taproot, and Tapscript, collectively known as Taproot. Each Bitcoin Improvement Proposal, also known as BIPs, introduces its upgrade to the network.
BIP 340: Schnorr Signatures
BIP 340 will define how Schnorr public keys and signatures are encoded. Schnorr signatures will bring better privacy, lower fees, and more flexible multi-sig. Schnorr’s public keys are smaller than the previously used Elliptic Curve Digital Signature Algorithm (ECDSA), and using smaller space will offer lower fees when adopted.
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BIP 341: Taproot
Taproot, also known as BIP 341, will define how Bitcoin will integrate Schnorr signatures. Bitcoin’s script has to be updated to assess Schnorr Signatures.
BIP 342: Tapscript
Tapscript or BIP 342 adds and updates several operation codes. These new scripts verify spends and signatures.
What will Taproot do for Bitcoin?
Taproot comes with several expected and promising upgrades like reduced transaction fees, increased privacy, and more functionality, including smart contracts.
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After the upgrade, Taproot will considerably reduce the transaction data size for Bitcoin transactions compared to today. That means transaction fee costs for using more complex Bitcoin wallet features (such as multi-sig or time-locking) will decrease, making it much cheaper to send bitcoin.
The Taproot upgrade will integrate the Schnorr digital signature scheme into Bitcoin, upgrading the cryptography used by Bitcoin. The privacy of Taproot will extend to applications that use time-locked contracts, such as CoinSwap, which mixes Bitcoin transactions to obfuscate the coins’ origin and destination. Lightning Network transactions will also become more private after Taproot goes online.
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Why is Taproot Necessary?
Despite what the mainstream media may say, bitcoin transactions are neither private or anonymous. The Bitcoin Network is an open, permissionless ledger where anyone can see the history of any transaction on the blockchain. Taproot adds a layer of privacy currently missing from bitcoin; while not perfect, it moves the OG crypto towards the privacy users and enthusiasts crave.
The Taproot upgrade will go online around Nov. 15.