- This is bitcoin’s first major upgrade since 2017, and it will impact the blockchain in a number of ways.
- The Taproot upgrade brings smart contracts to the protocol.
- It makes Bitcoin transactions cheaper and more secure.
The Bitcoin network has just seen a major tech update named Taproot, which is the network’s biggest update since 2017. It will allow developers to integrate new features enabling improvements of privacy, scalability, and security on the Bitcoin network.
Taproot, first proposed by Bitcoin Core contributor Gregory Maxwell in 2018, opens doors for various technical innovations including improving many things for the network such as privacy features and scalability.
The benefit of Taproot in Bitcoin Transactions
A big part of bitcoin’s makeover has to do with digital signatures, which are like the fingerprint individual leaves on every transaction. Right now, the cryptocurrency uses the “Elliptic Curve Digital Signature Algorithm,” which creates a signature from the private key that controls a bitcoin wallet, and ensures that bitcoin can only be spent by the rightful owner. The Taproot upgrade aims to increase privacy for certain transactions.
The taproot will add something known as Schnorr signatures, which essentially makes multi-signature transactions unreadable, according to bitcoin miner Alejandro De La Torre. Taproot makes smart contracts cheaper and smaller, in terms of the space they take up on the blockchain. Killeen says, this enhanced functionality and efficiency presents “mind-blowing potential.”
With the new upgrade, transactions from multi-signature wallets would look like any other transaction, enhancing the privacy and security of transactions. This will eventually pave the way for smart contracts to be made, ending the need for middlemen and bringing Bitcoin’s network up to speed with the likes of Ethereum that inherently enables smart contracts.
Developers, who are looking for ways to make use of current space more efficiently, can’t simply increase this limit without affecting Bitcoin’s decentralization. Taproot could address this- which will unlock the potential for smart contracts, which is use to eliminate middlemen from transactions.
Taproot isn’t just a single update. Rather, it is a combination of three different Bitcoin Improvement Protocols (BIPs) — BIP 340, 341, and 342. The Bitcoin Improvement Protocol is a formalized system of improving the Bitcoin protocol, undertaken by the community with consensus from miners.
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