Bitcoin: Taproot update has come. But what does it mean?
Taproot, the second upgrade to the Bitcoin network, went live on November 14, and Bitcoin users have already tested it. Taproot, which was first proposed by Bitcoin Core developer and former Blockstream CTO Gregory Maxwell, intends to boost the flexibility and anonymity of smart contracts in the bitcoin ecosystem. From a technical perspective, even the most complex smart contracts are as simple as conventional transactions as a result of this improvement. Many users are dissatisfied with the lack of anonymity in comparison to accessible peers. Many BTC traders and investors consider Taproot to upgrade the solution to some bitcoin issues. In this article, we explain how the introduction of new technological solutions affected the BTC ecosystem.
Taproot is the most significant upgrade to the bitcoin network since the implementation of the Segregated Witness (SegWit) protocol in August 2017. Taproot offers several significant technical enhancements, the most notable of which is the implementation of the Schnorr signature system and MAST. Moreover, the Taproot upgrade improves the ecosystem’s privacy, efficiency, and scalability. On November 14, a soft fork happened on block 709,632 mined by the F2Pool mining pool. Unlike the previous bitcoin upgrade in 2017, when many miners have not supported it, the current situation is quite opposite: around 98% of miners supported Taproot in June 2021. By the way, In September, a new version of the popular Bitcoin Core client (v 22.0) with update support was launched.
The bitcoin network’s daily payment value was last recognized as a record high after a $31 billion transaction chain resulted in a settlement. Compared to early 2020, the daily settlement value of the network has risen 40 times, thanks to the spread of bitcoin in El Salvador and other countries. Certainly, bitcoin continues to lead the crypto industry. Nowadays, the first cryptocurrency network is being improved through various new features, so it continues to maintain its leading position in the cryptocurrency world.
What had changed?
The majority of the modifications are related to digital signatures, which are essentially a form of fingerprint that the user leaves with each transaction. Until recently, the system used the so-called Elliptic Curve Digital Signature Algorithm (ECDSA). In other words, this method generates a signature from the private key of a bitcoin wallet and assures that only the owner spends money. Now, there is available the Schnorr signature method, which permits mixing many signatures into one. In other words, this means less block space and more privacy.
To be more specific, Schnorr’s signature is only one of three bitcoin improvement proposals (BIP). Tapscript and Taproot are also known as BIP Z40, Z42, and Z41, which combine to create BIP Taproot. As a result, the bitcoin network can become more efficient, flexible, and private by integrating the new BIPs.
Furthermore, Schnorr’s signatures are a game-changer for smart contracts (self-executing contracts recorded on the blockchain). Since smart contracts are less expensive with Taproot since they are completed in a single transaction, the network’s scalability improves as a result of the lower costs. Until now, the Ethereum network was the favored blockchain for such applications, but with this update, bitcoin is becoming a more vital role in decentralized finance.
MAST employs Merkle trees and abstract syntax trees to indicate coin spending requirements on transaction outputs. The unique feature of this technique is that when any data from the Merkle tree is revealed, we can validate that this data was included in the Merkle tree using the root hash plus some extra data (tree pathways). The rest of the Merkle tree is hashed and concealed. In other words, with MAST, you can just reveal the spending condition that has been completed.
However, soft fork lowers network fees by allowing multi-signature transactions to use fewer data. It also provides developers with a broader range of tools for developing new solutions.
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