What Does the Taproot Upgrade Mean for Bitcoin?Laura
There has been a lot of chatter over the latest proposed Bitcoin upgrade of the network which will be implemented in November 2021. This upgrade could move the Bitcoin protocol one step closer to better, and more improved functionality. Experts suggest the upgrade could make BTC transactions more efficient and private. It could also expand the network’s potential utility.
The proposed upgrade – called Taproot – has raised near-unanimous consensus in the Bitcoin community. Here’s what this could mean for developers, users, and investors in the space.
What is the Taproot upgrade?
Taproot was initially proposed by software developer Gregory Maxwell in 2018. and three years later, the upgrade appears ready for implementation. The proposed Taproot protocol upgrade switches the way signatures are handled on the Bitcoin network. If implemented, the current Elliptic Curve Digital Signature Algorithm (ECDSA) will be swapped with a “Schnorr signature scheme with MAST (Merklized Alternative Script Tree) and a new scripting language called Tapscript.”
Put simply, the upgrade allows a set of multiple digital signatures to be combined into one which reduces the load on the network. Consequently, it also reduces the fees and duration of each transaction. Since multiple transactions are packaged together, the number of participants and their identities can also be better hidden. Altogether, Taproot should make the Bitcoin network more secure and private for everyone involved.
When it is implemented, it will be the most significant alteration to the core Bitcoin network since Segregated Witness (Segwit) was adopted in 2017.
Advantages of this Upgrade
The biggest advantage to the Taproot upgrade lies in improved privacy and transparency in transactions.
Another benefit of the upgrade is allowing smart contracts on Bitcoin’s network. To date, smart contracts are primarily run on the Ethereum network. That’s because complex smart contracts require more space for data on the blockchain and Bitcoin’s network isn’t well-suited to this in its current form. The Taproot upgrade reduces the amount of space required on each block, which could finally bring more smart contracts and Decentralized Finance (DeFi) applications to Bitcoin.
By shifting the way digital signatures are handled on-chain, this upgrade could make transactions faster, more efficient, cheaper, and more secure. With these additional securities and efficiencies, Bitcoin is on track to becoming a mainstream financial asset that can be adopted by everyone in the long term.
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