Bitcoin is undergoing an upgrade that has been referred to as “Taproot” upgrade.
The Taproot upgrade has been activated!
The upgrade is a soft fork, or in other words, an upgrade that over time is adopted completely. This is in contrast with a hard fork, such as Ethereum’s London hard fork, which comes into effect immediately.
Taproot is a result of several bitcoin improvement proposals (BIPs) meant to make the network more private, secure, and scalable.
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SEE ALSO: Understanding Ethereum 2.0 and Why It Matters
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Below is a breakdown of the 3 proposals:
BIP340
Introduces Schnorr Signature Algorithm (SSA), a cryptographic scheme that makes complex bitcoin transactions simpler and more secure.
Here is an illustration of what SSA will bring:
If 10 different users sent BTC to a single wallet address (public key) under the current setup, it would appear on bitcoin’s ledger as 10 separate transactions. But using SSA, the bitcoin’s network will be able to bundle these 10 transactions into one transaction with a unique key.
BIP341
This builds on 2017’s SegWit upgrade and improves bitcoin privacy while lowering transaction fees. It also introduces MAST, which allows users to lock outputs to multiple scripts.
Under MAST, complex conditions required for transactions will be compressed into one single line of data, reducing the amount of data to be stored and transferred on the blockchain. This will boost efficiency.
BIP342
Reforms bitcoin’s scripting language by introducing a different scripting language called ‘Tapscript’ which changes how signatures are evaluated.
The changes under taproot are important as both transactions and conditions for their execution take up storage on the blockchain.
Thus the improvements under Taproot are expected to lead to have the following benefits to users of the network:
- Users will have much more privacy when it comes to making transactions on the network
- Lower transaction fees
- Taproot also makes future bitcoin upgrades easier by reforming bitcoin’s scripting language
- It will simplify smart contract functionality on the network, thus making it more of a force alongside ethereum
Taproot is also the first change to bitcoin’s protocol since SegWit, the last upgrade which took place in July 2017, and that sent the price of bitcoin climbing 50 percent to a then-high of $4,247 on August 23 of that year.
Thus, the Taproot event is another chance for a significant spike in the price given the advantages it introduces to the legacy coin.
While any price jump will remain to be seen, an upgrade on the bitcoin network is by itself an exciting development.
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