The Taproot soft fork is an important update that aims to improve the privacy, security, and scalability of the Bitcoin network. This update was released and activated on November 14, 2021 (November 23, 1400).
With the activation of taproot, one of the most ambitious updates of the Bitcoin network was carried out in block 709,632.
In this article, we will discuss what is the Bitcoin Taproot update and how does the implementation of Taproot affect the scalability, privacy and speed of transactions in the Bitcoin network?
Let’s dive in and explore together:
- What is Taproot in the Bitcoin blockchain?
- What is the difference between a normal transaction and a taproot transaction?
- What is the Bitcoin Taproot proposal?
- What is Schnorr’s digital signature algorithm?
- Different types of transactions in the Bitcoin network
- Smart contract in the Bitcoin network
- Lightning network
- Multi-signature transactions
- Schnor digital signature
- What are the benefits of updating Taproot?
- How does the Taproot update work?
- The impact of taproot on the price of Bitcoin
- Can taproot be used now?
- Frequently asked questions on taproot
What is Taproot in the Bitcoin blockchain?
Considering that TapRoot is the first major update to the Bitcoin network since August 2017, following updates to the Lightning and Segway networks, the implementation of TapRoot can be considered a major milestone in the Bitcoin network.
While Segwit and the Lightning network are focused on increasing the speed and reducing the cost of transactions, with the Taproot update on this network, the privacy, scalability and security of the Bitcoin blockchain network will increase.
In the taproot update, the cryptographic algorithm of the digital signature in the Bitcoin network will also change.
TapRoot comes with Schnorr Signatures to reduce some of the network load and improve ease of use, efficiency and network security.
TapRoot also generates a master key to summarize a set of signatures into a single signature. This makes it much easier, faster and cheaper to execute multi-signature and multi-input transactions.
In order to understand the new update of the Bitcoin network, it is necessary to understand the current structure of this network so that the importance of this update is clear to us.
Bitcoin is a public blockchain network and the information stored in it is transparently displayed on the network and anyone can see it. Despite creating transparency in the ecosystem, this feature has been a threat to people’s privacy, which is not pleasant for many.
TapRoot update will respect people’s privacy more than before. More specifically, Taproot is a soft fork of the Bitcoin network that improves privacy when sending complex transactions (using timelocks, multi-signature transactions, etc.).
What is the difference between a normal transaction and a tap root transaction?
Before taproot, transactions in which complex functions are used are visible and can be distinguished from normal transactions. But by applying the Taproot feature to the Bitcoin blockchain network, there will be no difference between a normal transaction between two people and transactions sent from (for example) multi-signature wallets.
In addition to increasing privacy, this item will reduce the volume of transactions and as a result, transaction fees will be reduced.
For example, a transaction sent on the Bitcoin Lightning network is different from a transaction sent from one person’s wallet to another person’s wallet (the script is different and this is visible to everyone).
But TapRoot will make it possible for transactions on the Lightning network to be exactly the same as normal transactions on the network, and no one will know the difference.
What is the Bitcoin Taproot proposal?
The Bitcoin TapRoot feature proposal was first proposed by Greg Maxwell, one of the most well-known developers of Bitcoin Core, in 2018.
After two years, in 2020, it was added to the Bitcoin core library, and since then, the discussion about this update of Bitcoin has become the first issue of the development of the blockchain network.
The website Taproot.watch, which exclusively provides information about Taproot and is managed by one of the Bitcoin developers named Hampus Sjöberg, said about this update:
Sjöberg believes that taproot is a 100-year-old soft fork that will bring a more coherent and sustainable blockchain in the long run.
Currently, the implementation of this update is in its final stages. Along with this update, another big change will be applied to Bitcoin’s cryptographic algorithms.
The use of Schnorr’s algorithm in Bitcoin will add the feature of digital signature aggregation to the Bitcoin protocol. This feature will have a direct impact on making the network more scalable and reducing transaction fees. We will introduce this feature in the following.
In addition to the above, TapRoot aims to improve the Bitcoin scripting language through the concept of Mashed Abstract Syntax Trees (MAST).
This issue provides new opportunities for smart contract capabilities in the network and thus we will see more acceptance of this field. MAST can help to make smart contracts more efficient and private by simply providing and specifying the parts related to the said contract.
What is Schnorr’s digital signature algorithm?
Claus Schnorr, a 77-year-old German mathematician and cryptographer, is the creator of the Schnorr algorithm. The Schnorr digital signature algorithm is a mathematical function for use in generating digital signatures.
The Bitcoin network currently uses the elliptic curve digital signature algorithm to manage the creation of digital signatures.
Schnorr’s digital signature algorithm is an older and stronger algorithm than the Bitcoin algorithm. But the creator of this algorithm did not publish this algorithm publicly until 2008, and for this reason Satoshi Nakamoto could not use it.
But in 2020, when this algorithm has been fully published and many developers have evaluated its security, it has been proven to everyone that Schnorr’s algorithm will have more security and efficiency compared to the current algorithm of the Bitcoin network.
Therefore, they decide to use this algorithm in the Bitcoin network.
Different types of transactions in the Bitcoin network
The main focus of the Taproot update is to improve more complex transactions on the Bitcoin blockchain network.
In this network, transactions can have different features, the addition of each feature will make that transaction more complicated and also increase its volume.
The use of hash time lock contract is one of these features. But what is this function and what are its features?
Smart contract in the Bitcoin network
It may be a bit strange to hear this, but smart contracts can also be implemented in the Bitcoin network. Of course, this smart contract is not comparable to smart contracts on the Ethereum network. However, according to the definition, a smart contract can also be implemented on the Bitcoin network.
One of these smart contracts is the Hashed TimeLock Contract. Using this function, financial payment channels on the Bitcoin network can be made intelligent.
For example, a time frame can be set for a financial payment channel. In this way, someone can send a transaction on the network and specify that this UTXO will not be spendable until block number N is generated on the network.
Lightning network
The Bitcoin Lightning Network uses the Hash Lock contract function. When a financial payment channel is created in the Lightning network, a transaction with a time lock function is sent on the Bitcoin main network, and the output of this transaction remains unspendable until a certain time.
This specific time is the defined time period for a financial payment channel on the Bitcoin network. In fact, the existence of such a function in the Bitcoin code allows people to make financial transactions on the Lightning network without knowing each other.
Multi-signature transactions
Transactions sent using the Multisig feature are another complex transaction on the Bitcoin network. In such transactions, the digital signature of the transaction will be generated from the combination of two or more private keys instead of being generated with a single private key. Such transactions have a higher volume compared to single signature transactions.
The more functions a transaction has in the Bitcoin network, the more space it will occupy in a network block, which will increase the transaction fee and decrease the speed of the network.
The Taproot update will convert these complex transactions into normal transactions and thus increase the scalability of the network in addition to reducing the fees for such transactions.
Schnor digital signature
One of the unique features of the TapRoot update is the change of Bitcoin’s digital signature algorithm to Schnorr’s method. This algorithm will convert digital signatures created by multiple private keys into a single digital signature.
What are the benefits of updating Taproot?
Reduces the amount of data sent and stored in the distributed ledger of the Bitcoin blockchain network (using Merkelized Abstract Syntax Trees).
- It increases the capacity of the network to carry out more transactions.
- Reduction of transaction fees: The data volume of a transaction will be significantly reduced when sending complex transactions in the Bitcoin network.
- Increased privacy: By implementing TapRoot and Schnorr’s Algorithm, transactions created by multi-signature wallets and transactions that use the timelock function are indistinguishable from normal transactions.
- The possibility of entering a smart contract into the Bitcoin network: By using taproot, complex transactions will generate very little volume. This feature can also increase the use of the Bitcoin network. For example, let’s say you’ve created a five-signature wallet and you’ve defined the presence of 3 out of 5 signatures as a requirement to spend assets. Using the time lock function, it is possible to define for the network that after 5 years, the existence of 1 signature out of 5 signatures is enough to spend the asset. In such a situation, if you lose 4 out of 5 private keys, you can still spend your bitcoins. This possibility is currently very expensive on the Bitcoin network.
- Increase network security: It eliminates the possibility of changing the digital signature before confirming the transaction by Bitcoin network miners, and it will eliminate the possibility of spending Bitcoin twice in the network using this method.
How does the Taproot update work?
After the introduction of BIP9 in the Bitcoin network, a democratic way to implement soft forks was implemented in the Bitcoin network.
According to this method, the nodes of the network should give their opinion of agreeing or disagreeing to change the network structure. They do this by signaling mined blocks on the network to perform an update.
In this way, miners and mining pools use a speedy trial method to reach consensus and coordinate the implementation of the taproot.
Among the major mining pools on the Bitcoin network, Antpool, Poolin, F2Pool, btc.com, Binance Pool, Viabtc, Foundry USA, Houbi pool, and Spiderpool have agreed to the taproot update.
To perform an update, signal with at least 90% of nodes. This process will be executed for every 2016 block.
In other words, after mining 2016 blocks in the network, at least 1815 blocks (90%) must signal. If in this time period, 90% of the blocks have no signal, the decision for this update will be postponed to the next 2016 block period.
If in one period, at least 90% of the blocks have a signal, the full nodes must update their Bitcoin Core software to the new version, so that the new changes in the network will be implemented.
The impact of taproot on the price of Bitcoin
One of the important questions surrounding the taproot update is its impact on the price of Bitcoin in the future. Many analysts believe that this update does not seem to affect the value of Bitcoin in the short term.
But the fundamental changes created as a result of this update will increase performance and competition in the Bitcoin network.
Also, Siddharth Menon, founder and CEO of WazirX digital exchange, stated that since 2010, the latest version of Taproot has been awaited and will have a positive impact on the king of digital currencies. He added:
The state of the Bitcoin network is slowly and steadily improving.
Can taproot be used now?
In this section, we will discuss whether it is possible to use Bitcoin taproot at the moment and whether the way of doing transactions should be changed?
There has been no change in the way of using the Bitcoin network compared to before TapRoot was activated. In simpler words, the way transactions are carried out in the Bitcoin network has not changed.
TapRoot adds new advanced features to the network. These new features can only be used through wallets such as Exodus. However, it will take some time to get used to these new features.
Developers of wallets must update their wallets by writing new codes so that users can access the new TapRoot features. It took two years for Sigwit to be used in more than 50% of daily transactions.
Therefore, it is expected that the adoption of Taproot will take the same amount of time.
After your desired wallet starts supporting taproot features, you need to update your wallet to the latest version. But it may take several years to activate this feature.
Also keep in mind that it may take several years for more than 50% of all daily transactions on the Bitcoin network to use taproot.
Frequently asked questions on taproot
What is Taproot?
Taproot is one of the most influential and important updates of the Bitcoin network. By doing the Taproot update, the privacy, scalability and security of the Bitcoin blockchain network will increase.
Also, with this update, the cryptographic algorithm of the digital signature in the Bitcoin network will also change.
Can taproot be used now?
Bitcoin taproot was released and activated on November 14, 2021. Bitcoin network users can now use taproot features using wallets like Exodus.
The taproot update can be considered one of the most important events in the Bitcoin blockchain network. Taprooting the Bitcoin network improves network scalability, security, privacy, and reduces complex transaction fees.
Also, after the Taproot update, the possibility of making transactions using smart contract functions in the Bitcoin network will be improved.
In this article, we discussed what is the Bitcoin Taproot update and how does the implementation of Taproot affect the scalability, privacy and speed of transactions in the Bitcoin network? What do you think about this update and its pros and cons? Share your thoughts with us.
