Table of Content
- How will Taproot Function?
- How will Taproot benefit Bitcoin?
- What will Taproot offer?
- How will it impact investors & Hodlers?
Taproot is one of the newest innovations with Bitcoin since Segwit activation back in August 2017. It changes how scripts operate within bitcoins protocol so it can be improved upon three main attributes; privacy, scalability, and security due to its soft fork nature (meaning you won’t need all nodes agreeing). Transactions made from now onwards are using features such as Schnorr signatures
Segwit was introduced as an important step for bitcoin’s scalability challenges with its limited block size limit by removing signature verifications from each individual blockchain-based bitcoin transfer (which can then be used again). This increases room within blocks so they may store more than 1MB worth of transactional data at any given time; it also leads to increased privacy since less information about users will need to be shared publicly.
Bitcoin Core developer Greg Maxwell first unveiled the Taproot proposal in January 2018. As of October 2020, Taproot has been merged to the Bitcoin Core library after a pull request created by Pieter Wuille. Taproot is expected to be implemented along with another upgrade called Schnorr signatures. This not only makes Taproot’s implementation possible but also enables a much-anticipated feature called signature aggregation.
On 21 July 2017, bitcoin miners locked-in a software upgrade referred to as Bitcoin Improvement Proposal (BIP) 91.
How will Taproot Function?
The Taproot will combine the users’ public keys participating in a smart contract and create new public access. That key can then create a unique signature which is only possible for that particular combination of addresses. These digital signatures are called Schnorr signatures, invented by the German mathematician Claus Schnorr in the 1970s.
Bitcoin’s highly anticipated Taproot update was accepted by more than 90% of the blockchain’s mining hash rate recently, showing that most of the community is ready to implement the change to the protocol. Taproot is Bitcoin’s first update in four years, following the divisive Segwit update spawned Bitcoin Cash.
The Taproot will not only improve Bitcoin’s usability, which might have the impact of broadening its market and possibly its value as well. It also reminds us of one of Bitcoin’s core characteristics, which appears to have gotten suffocated out within the prevailing market-driven narratives recently. Bitcoin is still a new technology, and its potential upside comes from more than its supply, inflation resistance, and decentralization.
In order to partition the execution of complex bitcoin scripts, Taproot will use a structure named Merkelized Abstract Syntax Trees. This is because one can reveal only that part of the script that gets executed.
How will Taproot benefit Bitcoin?
As explained above, Taproot will bring improvements in securing the privacy of Bitcoin. The Taproot can also boost the efficiency at the time of making any bitcoin transactions. There are some other benefits of Taproot:
- Reduced amount of data to be transferred and stored on the blockchain.
- More transactions per block (higher TPS rate).
- Lower transaction fees.
What will Taproot offer?
The Taproot will offer:
- Increased privacy: it refers to types of transactions. The Taproot will make complex transactions, such as those requiring multiple signatures or those with delayed release, indistinguishable from simple transactions regarding on-chain footprint.
- Lower fees: The data size of complex Bitcoin transactions will be reduced, which will lead to lower transaction costs
- More flexibility: A new type of signature will enhance intelligent contract functionality in Bitcoin, making it easier and cheaper for users to set more complicated conditions for a transaction.
- Lightning boost: Taproot will make transactions on the Lightning Network cheaper, more flexible, and private. The Lightning Network is a Layer 2 solution that enables faster and more scalable payments that periodically anchor in aggregate form to the Bitcoin blockchain, offering eventual Bitcoin security while amplifying speed and potential throughput.
How will it impact investors & Hodlers?
The Taproot update will offer many perks to users and companies alike. It is an upgrade that is worth waiting for as it offers increased privacy, lower fees, and more flexibility in the way of signatures on transactions. If you are a company using Bitcoin or want to be part of this new wave of technology, we hope you’ll make upgrading your system to Taproot one of your priorities so that you can experience these benefits firsthand! Cxihub has already begun preparations for the upcoming taproot release by updating our infrastructure with all necessary components needed to integrate taproots into our platform