When Bitcoin, the most prominent cryptocurrency in the world, announced the Taproot update, many crypto fanatics wondered: what is Taproot and why is this change important in the grand scheme of things?
The Bitcoin Taproot update is perhaps the most important upgrade Bitcoin has seen. Implemented on 14 November 2021, this update has benefited the cryptocurrency and its blockchain in terms of its security, privacy and its efficiency, among many other things. This update has the potential to change the Bitcoin blockchain significantly over the coming years.
Who developed Taproot?
The older SegWit mETHod has certainly brought about some controversy in the past regarding how the blockchain should be run, as can be seen by the contentious split and the creation of Bitcoin Cash. Since then, developers have discussed how to improve the cryptocurrency’s network.
In 2018, one of Bitcoin’s leading developers, Greg Maxwell, initially proposed the Taproot upgrade. Along with Maxwell, Peter Wuille, Tim Ruffing, A.J Townes and Jonas Nick joined the project. The update was widely accepted and reached a consensus for implementation on June 12th, 2021.
What does the Taproot update do?
The most significant change that this update has brought about is the way Bitcoin carries out its transactions. Currently, Bitcoin batches multiple signatures and transactions togETHer. This is different from past mechanisms, where Bitcoin validates each digital signature against a public key to verify transactions. This method is generally slow and inefficient, because there are complex multi-signature transactions that require multiple inputs and signatures.
The Taproot implementation now enables signature aggregation. This means that multiple and complex signatures from multi-signature wallets can be aggregated and verified togETHer, rather than individually. This update basically condenses transactions that contain many inputs, such as multiple wallet addresses, into a single one.
Not only does this increase the efficiency and speed of transactions, but it also greatly maximises privacy on the network. It is now increasingly difficult to distinguish between single-signature and multi-signature transactions, making it harder to identify the parties involved in a transaction on the blockchain.
But what is Taproot exactly? Let us explore this on a more in-depth level.
The three BIPs
In the Taproot update, three Bitcoin Improvement Proposals (BIPs) were implemented. These are BIP340 (BIP – Schnorr), BIP341 (BIP – Taproot), BIP342 (BIP – Tapscript).
First, BIP – Schnorr introduces “Schnorr Signatures”, which is a faster, more secure and less data-intensive way to authorise transactions. It introduces a technique called “key aggregation”, which enables the batching of multiple signatures and transactions togETHer. This is a stark contrast and a great improvement when compared to the older method of Elliptic Curve Digital Signature Algorithm (ECDSA), which is used to generate keys and verify transactions individually. With Schnorr Signatures, the blockchain network is able to derive a single aggregated public key and a single aggregated signature from multiple transactions, verifying numerous transactions at once.
Second, BIP – Taproot (which is where the update got its name from) builds on the privacy benefits of the SegWit upgrade in 2017. It implements Merkilized Alternative Script Trees (MAST), which allows only the executed conditions of the transactions to be committed to the blockchain. Typically, users on the Bitcoin blockchain would want to increase the security of their transactions by introducing many requirements such as multisig (multi-signature) approval. MAST makes such mETHods less data-intensive, while facilitating such methods in a more efficient manner. Not only does this store less data on the network, but it also greatly increases the privacy of Bitcoin users on the platform.
Third, BIP – Tapscript essentially introduced a change in the coding language to the Bitcoin script to accommodate Schnorr Signatures and Taproot technology. It also makes it easier to implement future updates to Bitcoin by allowing new types of opcodes (transaction instructions) to be more seamlessly introduced.
Taproot’s impact on Bitcoin and its future
The Taproot update certainly fulfils promises of a more efficient and private Bitcoin network. Transactions can occur without committing too much information on the blockchain, reducing fees and saving space on the network. Furthermore, less transaction data is publicly available on the ledger, offering greater privacy to users. Signatures will no longer be malleable. This means that there is no way for signatures to be altered and mutated before the transactions get confirmed. This directly leads to a greater level of security in the network.
The future is bright for Taproot Bitcoin. The update has opened doors to greater smart contract implementation. With Bitcoin being able to handle and execute more complex transactions, there is a strong likelihood that Bitcoin can potentially support Decentralized Finance (DeFi) and non-fungible tokens (NFTs) on the network, similar to ETHereum. As such, Taproot Bitcoin can potentially be utilised for many real-world applications.
Lastly, Taproot Bitcoin may likely be a stepping stone in shaping Bitcoin’s legacy for many years to come. Following the Bitcoin and Bitcoin Cash split, we now may have laid the foundation for how Bitcoin should be governed in the future.
In Conclusion
What is Taproot Bitcoin? It is an upgraded version of Bitcoin that brings about many benefits in terms of scalability, privacy and security. Users may, however, choose to opt out of this update if they choose to.
