Bitcoin Upgrade, Codename “Taproot”
Bitcoin, the open-source cryptocurrency, has an active development team constantly seeking new ways to improve the core Bitcoin protocol. In this case, the Bitcoin upgrade codename “Taproot” will activate at block 709,632. It’s Bitcoin Improvement Protocol (BIP) 9.
What is Taproot?
Taproot is a softfork. That means that even if there are nodes that don’t upgrade, it’s okay because the Bitcoin network can operate with both set of rules. However, miners that don’t upgrade won’t earn on any discovered blocks. However, that’s why there was the waiting period after Speedy Trail passed.
- Taproot and Nodes – The soft fork change to nodes means they can’t help to enforce the new rules of Taproot, but can still accept and forward to the network Taproot blocks.
- Taproot and Miners – Miners need to upgrade if they wanted to earn block rewards. However, from the time Speedy Trial completed, miners had five months time to upgrade their software. If not enough Miners upgrade, then a chain split is possible.
- Taproot and Bitcoin Wallets – To take advantage of any new features, wallets will need to be programmatically upgraded. As this is the most noticeable change for end users, it’s key to note it took SegWit roughly two years to reach 50% adoption.
One change is Bitcoin upgrading to a new cryptographic scheme from Elliptic Curve Digital Signature Algorithm (ECDSA) to “Schnorr Signatures”. In a ECDSA scheme, a transaction is signed with the user’s private key. With Schnorr, Bitcoin transactions have increased privacy, security, and scale. Schnorr Signature was invested and patented in the 1990, but expired in 2008. Since there wasn’t enough popularity and testing, ECDSA was implemented in the initial release of Bitcoin.
- How does Schnorr increase scale? Each “block” of a Bitcoin has limited space and signature’s have a set number of characters. With the introduction of multi-signature wallets, which require two or more signatures to trustlessly sign and send a transaction, a multi-signature transaction requires more space than a single-signature transaction. Schnorr signatures can combine multiple signatures into one, resulting in fewer total characters to sign and send a transaction. This Increase in the scalability of Bitcoin will reduces the cost of each transaction and allows for more transactions to fit in each block.
- How does Schnorr increase privacy? The combination of Know Your Customer (KYC) and Bitcoin chain analysis companies, Bitcoin transactions can now be traceable. Since Schnorr Signatures makes multi-signature transactions looks like single-signature transactions, it makes it more difficult for Bitcoin analysis companies to analyze the Bitcoin blockchain.
Another change enables Merklized Abstract Syntax Trees (MAST) to make smart contracts more efficient and private. Before Taproot, smart contracts on Bitcoin existed using a language called “Script”. “Script” allows conditions to be programmed to define the rules of the smart contract. However, the conditions and potential routes of the smart contract are public on the Bitcoin blockchain, which reduce privacy. It is also not efficient because storing all the routes on the blockchain require more space on the “block”.
- With Taproot and MAST, all the conditions in the transaction are stored as merklized hash. Additionally when the transaction is completed, MAST only shows the successful route, and keeps hidden the alternative routes. This greatly increases privacy of a “smart contract” transaction.
- And since only the matched route is included on the Bitcoin blockchain, it reduce the size of the transaction. A smaller sized transaction results in more efficiency, lower transactions costs, and more scale for smart contracts.
History Behind Taproot Activation
April 15, 2021 – Start of “Speedy Trial”, a three month window where miners vote by including a bit along with completed blocks, on activation of BIP 9. If there is >90% a mined blocks during a designated two week windows, it signals for Taproot to proceed with activation.
June 2021 – Block 687,284 mined concluding “Speedy Trial” with a 99% “signal” in favor of activating Taproot. Now starts the 5 month waiting period before BIP 9, Taproot, goes into affect.
November 13, 2021 – Taproot is scheduled to be officially active in Bitcoin.