Taproot, the Long-Awaited Bitcoin Upgrade
With all its problems and issues, Bitcoin has always been the de facto cryptocurrency leader. Consequently, every crypto investor or enthusiast has always seen BTC as a key investment step and the largest hope in achieving mass adoption of cryptos worldwide.
However, the Bitcoin blockchain has not had any major upgrades for about 4 years since the launch of SegWit in 2017. As a result, major issues still exist in the form of security, privacy, and scalability. The taproot upgrade promises to be a good fix, offering the possibility of putting these issues to rest.
A Brief on Taproot
Taproot was first proposed in January 2018 by Greg Maxwell, one of Bitcoin’s core developers. The product is a privacy-oriented soft fork on the Bitcoin blockchain. It aims to heavily increase the anonymity of traders and streamline the processes involved when making complex transactions.
Before, one’s hope of achieving trade privacy on bitcoin was reliant on external crypto tumbler service providers who do bitcoin mixing. Without using such service providers, transactions are traceable thanks to requirements for transaction BTC such as multi-signatures, amongst others. Such features increase transaction complexity, and therefore it is traceable by anyone.
Taproot intends to add the anonymity features directly onto the blockchain by cloaking the scripts. Such is the anonymity ability of Taproot that it will even appear as though the script to a transaction never really ran.
How Does Taproot Work?
Now moving onto the gritty bits of how the upgrade works, Taproot uses an ingenious way of cloaking transactions. It has already been established that the complexity of making bitcoin transactions thanks to the requirements makes them complex and easily traceable.
The upgrade merges all these requirements into one cloakable bundle that appears as one simple transaction. It is made as an indistinguishable peer-to-peer transaction via a lightning network or a complex smart contract.
Any external observer will see nothing but a simple peer-to-peer trade. Taproot is, however, expected to run alongside another upgrade called Schnorr Signatures.
After the launch of Bitcoin in 2009 by the founder(s) Satoshi Nakamoto, the choice of its digital signature algorithm was the Elliptic Curve Digital Signature Algorithm (ECDSA). ECDSA’s higher popularity levels influenced the choice at the time, as well as its open-source nature.
On the other hand, the Schnorr signature is another type of digital signature bound by the requirements of the Schnorr Signature Algorithm. Claus Schnorr, a German scientist, first formulated it. The Schnorr Digital Signature Scheme (SDSS) has been developed over the years. Its key selling points include high efficiency, simplicity, and the ability to generate short signatures.
While working in tandem with Taproot, the SDSS can combine the signatures of several transacting parties involved in a complex transaction into one unique Schnorr Signature. It is largely thanks to their ability to take on several keys within the complex Bitcoin transaction.
Timeline For the Evolution of Taproot
The proposal by Greg was first tabled to the Bitcoin community in January 2018. Peter Willie’s request saw it integrated into the Bitcoin core library by October 2020. The upgrade, however, needs a minimum of 90% mandate for it to move to the next level and be implemented.
The month of May marked the first signaling period for Taproot, starting quite slowly as it coincided with a Chinese holiday. However, by the 19th of May 2021, 94% of Bitcoin’s hashtags had already taken the step of including the Taproot signal bit to support it being upgraded.
This was well above the 90% required per Bitcoin mining difficulty level support. The prevailing difficulty level had, however, already witnessed many non-signaling blocks. Therefore, there was a need to wait for the next difficulty level before locking in the upgrade.
By the 12th of June, 2021, the Taproot activation was locked in. It managed to garner the needed portion of block support, about 1815 out of 2016 blocks or 90%.
The achievement of the Speedy Trial requirements means that its implementation is earmarked for November 2021. Speedy Trial in the process agreed upon by Bitcoin developers and stakeholders to establish support for the project.
Benefits of Taproot to Bitcoin
The combination of Taproot and Schnorr Signatures can create many benefits for the world’s largest blockchain. These include;
As has been explained regarding the aim of the project, Taproot promises improved privacy and anonymity of transactions. Users will get to enjoy its cloaking abilities to hide transaction details from other parties.
It should, however, be noted that the wallets of the two transacting parties are still exposed. Those wishing complete anonymity should thus seek further privacy service providers like crypto tumblers towards that end.
The upgrade will also help improve security by addressing the signature alteration issues. Currently, it is possible to alter a signature before the confirmation of a transaction. This creates a loophole whereby double-spending becomes a possibility.
Taproot makes sure signatures can’t be altered once signed. The security of Bitcoin gets a boost as a result.
Boost To Transactions Per Second
The current Transactions Per Second (TPS) rate of bitcoin is expected to boost once the upgrade is complete. In addition, thanks to the simplicity and efficiency of SDSS, the number of transactions per block will also get a boost in numbers.
Lower Data Backlog
Thanks to Taproot’s ability to bundle together the process involved when making complex transactions, the data to be stored will go down. The combination of several digital signatures into one unique Schnorr signature also reduces the data backlogs. As a result, the transaction speed will also get a boost.
Reduced Transaction Costs
Taproot is expected to reduce the cost of transactions by removing the necessity of contracting 3rd party transaction privacy service providers. In addition, the increase in simplicity and efficiency is also billed to reduce transaction costs directly.
The Taproot soft work is an eagerly awaited Bitcoin upgrade that will help cement the blockchain’s position as the world’s leader. Moreover, it is the biggest news in regards to Bitcoin for the past 4 years.
Aimed to improve the blockchain’s level of transaction anonymity, Taproot still goes a long way to generate more benefits. It will boost transaction speeds, costs, security and reduce the data load required for storage.
While it gives a boost to privacy, it won’t transform Bitcoin into completely private crypto. The wallets of the transacting party may still be exposed. Nevertheless, the upgrade could still be one of the best things to happen to the Bitcoin blockchain in a long time.