The proposed Bitcoin protocol upgrade is the biggest in years and will include updates to Bitcoin smart contracts, scalability and privacy.
Why Is The Taproot Update Important?
Taproot is a Bitcoin softfork that will:
- Upgrade Bitcoins core cryptography
- Improve privacy and transaction fees
- Reform Bitcoin’s scripting language
In order to complete a Bitcoin transaction, you need to prove that you know the private key connected to a public key. A digital signature is used to prove that you know the private key without revealing it. Some transactions could have multiple parties with specific conditions to pay out the Bitcoin.
A new signature system is going to be added, and simply put the introduction of Schnorr signatures allows for multiple signatures to be merged into a new one.
This makes the process more efficient and cheaper for transactions that require multiple signatures it. When the transaction processing capacity per second increases, it reduces the fees for each transaction. Another benefit is added privacy since you can’t see how many participants there were in the transaction.
In order to implement these new transactions, the update adds new commands in the underlying programming language. These new scripts are used to verify Taproot spends and Schnorr signatures, and they are collectively known as Tapscript. This implementation adds smart contract flexibility which can lead to the development of smart contracts on the Bitcoin protocol.
Upgrades Are A Community Process
The Bitcoin community is hoping to activate Taproot in the near future, although its activation path is still unclear.
If 90% of the blocks mined during this period include the Taproot signal bit (or any of the other roughly two week difficulty periods that occur between now and the August 11 timeout), then the upgrade is “locked in” for activation in November of this year.
This version is compatible with Bitcoin Core up to a point. If all miners signal, Taproot activates network-wide with no problems, but if they don’t, then there is a “flag day” for mandatory activation set in October of 2022. You can see the nodes that have signaled that they are running the Taproot softfork on taproot.watch.
For a more detailed explanation here is a video of Pieter Wuille, Bitcoin Core developer and Blockstream co-founder, speaking about Taproot, Schnorr, and SIGHASH_NOINPUT.
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