Taproot is the Bitcoin network’s first update in four years. It comes after the Segwit update divided the community and led to the separation of Bitcoin and Bitcoin Cash.
Taproot combines the public keys of all users in a complex transaction in a new unique key. This increases privacy and reduces necessary block space.
Taproot opens the door to smart contracts on the Bitcoin network and will be implemented in November 2021.
Share this article
Taproot, the first update to the Bitcoin protocol in four years, will provide better privacy and security to the leading blockchain. Crucially, it will also improve smart contract efficiency.
What is Taproot?
Bitcoin’s highly anticipated Taproot update was accepted by more than 90% of the blockchain’s mining hashrate over the weekend, signaling that the majority of the community is ready to implement the change to the protocol. Taproot is Bitcoin’s first update in four years, following the divisive Segwit update that spawned Bitcoin Cash. Although Binance showed some resistance to Taproot, it now seems to have gained approval across the Bitcoin community. Taproot was locked in at block 687285 to celebrations across social media. SlushPool, one of Bitcoin’s leading mining pools, mined the block Saturday.
To understand the benefits of Taproot, it’s necessary to have an understanding of how on-chain transactions work. In essence, a public address produces a cryptographic proof that it has all the proper permissions to make a transaction. To do so, it uses its private key to provide a unique signature and prove that the transaction is truly coming from the user.
The cryptographic proof gets stored on the blockchain, which explains why we can trace every Bitcoin transaction. By deciphering the cryptographic proofs in each block, anyone can follow transactions between addresses and identify the sender and receiver from their public keys.
Smart contracts are interactions between many addresses that allow more complex transactions to take place. While smart contracts are most frequently associated with Ethereum, they can also be created on the Bitcoin network. Smart contracts are made of code that dictates the terms of each transaction and can include many different users.
In the Bitcoin network’s current form, smart contracts require an immense amount of space to be stored on the blockchain. As transaction fees are a function of the amount of space a transaction wants to occupy in a block, creating smart contracts on Bitcoin is very expensive. This is because such complex transactions have to link all public keys associated with any smart contracts, making the kind of DeFi projects found on Ethereum completely impossible.
Taproot will combine the public keys of the users participating in a smart contract and create a new public key. That key can then create a unique signature which is only possible for that particular combination of addresses. These digital signatures are called Schnorr signatures, invented by the German mathematician Claus Schnorr in the 1970s.
These signatures have two advantages over their previous implementations. First, they hide individual users’ public keys in any smart contract, meaning only the unique combined public key is visible on the blockchain. Second, they drastically reduce the amount of space required in any block to create complex smart contracts. Notably, a smaller signature requires lower fees, something that many Bitcoin users would likely welcome. The cost of using the network hit new highs in April as the price of the asset surged.
Effectively, Taproot will make complex Bitcoin’s complex smart contract interactions look like simple payments between two public keys. The ability to run smart contracts potentially paves the way for Bitcoin to run similar DeFi activities to those found on Ethereum. These changes will also apply to the Lightning Network, which might the best place for smart contracts to live on the Bitcoin network. Taproot is scheduled to launch in November 2021.
Disclaimer: The author held ETH and several other cryptocurrencies at the time of writing.
Share this article
The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.
You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.
See full terms and conditions.
Bitcoin Takes One Step Closer to a More Scalable and Private Future
Bitcoin Core is relatively conservative, prioritizing simplicity and security over an abundance of features. That doesn’t mean the network is the same as it was back in 2009, however. After…
Binance Controls the Only Major Pool Rejecting Bitcoin’s Taproot Upd…
Bitcoin’s Taproot update looks set for activation, with over 56% of the hashrate now showing support. Taproot will upgrade Bitcoin’s smart contract capabilities, allowing users to send smart contracts disguised…
Bitcoin Rebounds on Elon Musk Tweet, Taproot
Bitcoin jumped over 10% to almost $40,000 after an Elon Musk tweet and confirmation of the blockchain’s Taproot update brought positive sentiment to the market. Bitcoin Ascends Bitcoin is flirting…
What is Kusama? How Polkadot’s playground accommodates blockchain de…
Kusama is relatively young and was founded in 2019 by Dr. Gavin Wood, who also founded the Web3 Foundation and co-founded Ethereum. The team behind Kusama is essentially the same…