What is Bitcoin Taproot? Explaining three important features
Even though the SEC just denied a Bitcoin Spot ETF, Bitcoin is becoming an even more secure, efficient & upgradable Blockchain & Cryptocurrency. Bitcoin is upgrading to Taproot! In this article, I’ll share with you three very important features of the Bitcoin Taproot upgrade.
See a video explanation here:
1. Increased Anonymity
Currently, you can sign a bitcoin transaction with one private key or with multiple private keys. Using multiple private keys is called a multi-signature. This upgrade will introduce Schnorr signatures and key aggregation which means that no one will know whether you used multisignature or single signature as both signatures will look the same.
2. Efficient Transactions & Low Transaction Fees
Transactions will take up less space on the blockchain as only the executed part of the script is committed to the blockchain. Other parts of the script not used isn’t committed thus allowing for more privacy. By committing less transaction information to the blockchain, less transaction data is available for anyone checking Bitcoin’s publicly available ledger.
Since transactions will include less data, more transactions can be added to a block which may lead to lower fees per user.
This is achieved by implementing Merklized Alternative Script Trees (MAST). Merkle trees are widely used in cryptography as a way to prove data exists in a set, without having to reveal the entire set.
3. More Complex Smart Contracts
It adds new opcodes which allow developers to create more complex smart contracts. This is accomplished via Tapscript which updates the Script coding language used to write bitcoin transaction parameters in order to accommodate Schnorr Signatures and Taproot technology for those that opt-in to the upgrade. Upgrading via tapscript will make upgrades easier in the future.
Taproot is anticipated to lay the technical foundation required to welcome Decentralized Finance (DeFi) on the Bitcoin network.
When will we see these changes?
Taproot is a soft fork so nodes running outdated software will still work. The benefits will be realized in months and years to come as more node operators and service providers onboard onto Taproot.
This weekend, Bitcoin is upgrading for the first time in 4 years and I’m very excited to see where this takes us.
