The Bitcoin blockchain has the largest deployment in the last 4 years (since the activation of the Segregated Witness (SegWit) protocol in August 2017) an update called Taproot. As noted by CNBC, the update will bring more privacy and transaction efficiency to the Bitcoin network, as well as open up the potential for smart contracts.
What is changing
Unlike the 2017 Bitcoin update, called the “last civil war” due to ideological divisions that divided the network, Taproot enjoys near-universal support.
Most of the changes are related to digital signatures. The cryptocurrency now uses the so-called “elliptic curve digital signature algorithm”, which creates a signature from the private key that controls the bitcoin wallet and ensures that only the rightful owner can spend the cryptocurrency.
As noted by The Page, the Taproot update will add the so-called Schnorr signatures (or Schnorr scheme), which will allow aggregating multiple signatures for one transaction into a single signature due to the linear mathematics embedded in it.
This will not lead to more anonymity for your individual Bitcoin address on the public blockchain, but it will make simple transactions indistinguishable from more complex and multi-signature transactions. In practice, this means more privacy, because your keys won’t have that much visibility in the chain.
These enhanced signatures are also game-changing for smart contracts, which are self-executing agreements that are stored on the blockchain. Smart contracts can theoretically be used for almost any transaction, from monthly rental payments to registering your vehicle. Taproot makes them cheaper and less energy efficient.
“The most important thing about the Taproot update is smart contracts. It is already the main engine of innovation on the Ethereum network. Smart contracts essentially give you the ability to truly build applications and businesses on the blockchain, ”said Fred Thiel, CEO of Marathon Digital Holdings, a cryptocurrency mining company.
Taproot update was suggested back in 2018
The Taproot update was originally designed in 2018 by Gregory Maxwell, a former Bitcoin Core developer, co-founder and former CTO of Blockstream.
In June 2021, 98% of the network’s miners announced their readiness to activate Taproot.
In September 2021, a new version of the popular Bitcoin Core client (v 22.0) was released, in which Taproot support was already implemented.