BITCOIN TAPROOT UPGRADE [EVERYTHING YOU SHOULD KNOW].
The whole world is not constant, changes happen every second in every sector you name.
Especially in technology, we’re seeing changes every day, and the internet is one of those changes in the ’90s, which led to a new era of finance introducing Bitcoin.
Since the emergence of Bitcoin, the crypto world is constantly evolving by introducing new coins, protocols.
Even Bitcoin has seen many changes over its decade tenure; the latest one accrued in 2017 is called SegWit, which aims to accelerate transactions. The SegWit update came at the right time because, at that time, Bitcoin was facing criticism for becoming slow.
Now the criticism turns to Bitcoin’s privacy features; because on the Bitcoin blockchain, anyone can monitor transactions that occur on the network. For someone who values privacy, this could be a major concern.
Also, now there’s a DeFi trend where the whole financial world is becoming digital using smart contracts that run on different blockchains. Many turn their critical eyeballs to Bitcoin for being constant for many years, not allowing any major innovation using its blockchain.
But now Bitcoin is changing, and this change is called Taproot.
What Is Bitcoin Taproot?
Simply, Taproot is a name given to the bitcoin update which enforces some new rules on the Bitcoin blockchain.
In technical terms, Taproot is a soft fork that will occur in 2021 November on block 709,632, the new rules defined by a series of Bitcoin Improvement Proposals (BIPs) will be activated and start being enforced.
Whose Idea Was It?
Gregory Maxwell first proposed the Taproot in 2018.
Maxwell is a developer for Bitcoin Core, open-source software created by Blockstream, where Maxwell was once CTO.
Bitcoin Core is the predominant software client for Bitcoin, meaning it allows individuals to interact with the blockchain.
By downloading Bitcoin Core, you can take part in validating transactions on the Bitcoin blockchain.
What Changes Does Taproot Bring to Bitcoin?
Well, nothing drastic changes happens to Bitcoin. You can think of Taproot as updating software.
This particular update is to concentrate more on privacy and bring flexibility in constructing complex smart contracts on the Bitcoin blockchain.
And taproot is not just one update that happens. It is a name given to three different updates happening at the same time.
Three updates are Schnorr Signatures, Taproot, and Tapscript; in technical terms, BIP340, BIP341, and BIP342 are often collectively referred to as BIP Taproot.
Now, look at one by one what changes they make to Bitcoin.
Schnorr Signature is the cryptographic signature scheme that can produce a single unique signature by taking multiple keys inside a complex Bitcoin transaction.
Before Schnorr Signature, Bitcoin used ECDSA (‘Elliptical Curve Digital Signature Algorithm’) signature, which ranged from 71–72 bytes long, but Schnorr Signature is 32 bytes long. These small space savings offer fee savings to Bitcoin users who adopt Taproot.
Schnorr Signature is developed by Claus Schnorr — a German mathematician and cryptographer. The signature is under patent protection till 2008.
Taproot defines how the Bitcoin protocol will integrate Schnorr Signature.
And also integrates Merkelized Alternative Script Trees (MAST), which allow users to lock outputs to multiple scripts, plus it expands the flexibility and utility of Bitcoin contracts in an inexpensive and privacy preserving way.
Moreover, Taproot introduced the Pay-to-Taproot (P2TR) script, which allows users to pay with either a Schnorr public key or a variety of other scripts like Multi-Signature.
Tapscript introduces and updates several opcodes (operation code, or opcode, is a basic command of some computer languages.), which Bitcoin already has in its own scripting language.
These new scripts are used to verify Taproot spends and Schnorr signatures, and they are collectively known as Tapscript.
Benefits of Taproot.
The bitcoin blockchain is transparent. Anyone can track the transactions for exposing some details about the people involved in the transaction. Some blockchain tracking firms such as CipherTrace and Chainalysis take advantage of transparent systems to track the transaction and provide all the datas to government agencies.
By introducing Schnorr Signature, Taproot tackles the issue; even though Bitcoin blockchain is transparent, Schnorr makes complex transactions like Multi-Signature, time-locked contracts hard to track by executing the transaction immediately and producing a single unique key.
Taproot scripts occupy less space in a Bitcoin block, making the overall size of the block reduce when transactions are added, leading to lower transaction costs.
Enhance Smart Contract Functionality.
There are different types of Bitcoin Smart Contracts. For example, a smart contract might specify that bitcoin should be automatically sent from one user to another after a certain time delay.
Bitcoin’s Taproot upgrade gives Bitcoin users significant flexibility in constructing complex smart contracts on the bitcoin chain. It also enables efficiency and privacy gains for Lightning Channels, which are themselves a type of smart contract running on top of Bitcoin.
As you know, Bitcoin is decentralized; no one controls the network, unlike any other software where the decision is taken by a central authority to upgrade or do any further changes.
But in a decentralized network like Bitcoin where millions of stakeholders, including developers, miners, institutions and individuals are involved, there is a rule of consensus that has to be met to make any changes in the network.
Especially for Taproot, there are a lot of debates going on in the community. Some wanted to move forward with BIP9, which made the upgrade contingent on miner support like in previous soft forks; some argued and supported BIP8, which would push through the update with or without miners’ support.
Finally community members, in public meetings, decided to go with the “Speedy Trial”, which gave a three-month period for miners to signal with a 90% threshold needed for activation.
The first phase of the Speedy Trial began in May 2021 and ends in August 2021, which is successful to lock in Taproot.
In Speedy Trial, miners who wish to adopt the upgrade can signal their support by including special data called “signal bit” in the block they mined, within the difficult period which occurs every 2,016 blocks, or roughly every two weeks, in order to maintain a target block time of 10 minutes.
If 90% of the blocks mined during this difficult period include the Taproot signal bit, then the upgrade is “locked-in” for activation.
The next phase of activation after the “locked-in” is basically a five-month waiting period. During this time, active participants of the Bitcoin blockchain, such as miners and nodes, will have to update their software to the newest version of Bitcoin Core that contains activation logic for the Taproot soft fork (and some other improvements).
Even though the Taproot upgrade will happen to Bitcoin in November; many raised voices against the update.
Edward Snowden, the former National Security Agency contractor, whistleblower and blockchain explorer Blockchair’s lead developer Nikita Zhavoronkov, are the main parties who raised privacy concerns but Bitcoin developers and community members argue this is a concern that many have already considered.
What do you think about the Bitcoin Taproot upgrade?