Next month in November, a critical update called Taproot is set to overhaul the bitcoin blockchain. The last update was over 4 years ago when the Segwit update divided the community and led to the fork of Bitcoin creating Bitcoin Cash. Since then technology has certainly advanced, so many in the Bitcoin community await this update with open arms. If you’re wondering what Taproot is all about, keep on reading!
WHY DOES BITCOIN NEED AN UPDATE?
As it currently stands, the bitcoin blockchain is not scalable. When users send or receive payments on the network, each portion of a Bitcoin comes with its own script. These scripts become public data on the bitcoin network, which slows it down while also showing sensitive information about your funds. As Bitcoin grows in popularity, this only becomes more of an issue.
To add to that, smart contracts on bitcoin have been known to be quite difficult to work with, which explains why most people choose Ethereum to develop smart contract applications.
WHAT IS TAPROOT?
The Taproot update seeks to improve all of the above issues with the Bitcoin network by providing better privacy and security and improving smart contract efficiency. The Taproot update is made up of several components which will all work together to improve the bitcoin network, which is a huge deal for the entire blockchain community!
Below is each of the Taproot components; let’s take a look to get a better understanding of the update!
1. Schnoor Signatures
Schnorr Signatures are a new form of blockchain transaction signatures that creates advanced security, lower fees, and flexible multi-sigs. When a block gets a transaction, the transaction is always accompanied by a signature. Signatures ensure that transactions can’t be altered in any way.
Schnorr Signatures also have a unique function that speeds up the entire bitcoin network, adding scalability to its list of advantages. Schnorr takes several signatures and public keys and groups them all into one “master” signature, meaning that miners will only need to verify one signature instead of hundreds. This lightens an immense load from the network, making it much faster than it used to be.
2. Taproot
Taproot is a script update that brings a new type of payment called (P2TR) Pay-to-Taproot to the bitcoin blockchain. In short, P2TR lets users choose whether they want to make a transaction using a Schnorr public key or other built-in methods that already exist in bitcoin’s network. This provides users with a choice as to whether their transactions are anonymous or shared. Complicated transaction approval processes can be avoided altogether, freeing up the network immensly.
3. Tapscript
Tapscript is an update to Bitcoin’s current script. It is an extensive collection of code that enables all of the Taproot changes to actually work within the bitcoin network. Without it, none of the updates and features mentioned above could happen!
Thanks to Tapscript, the bitcoin blockchain will also be able to handle larger contracts and higher limits in terms of what the network can do in the near future. This allows for the potential for smart contracts within the bitcoin network, meaning that developers will be able to log onto the bitcoin network and create smart contracts and dApps (like what they can do with Ethereum!). This allows for an incredible amount of innovation in the world of DeFi; a critical benchmark for the bitcoin network.
WHAT LIES AHEAD FOR BITCOIN?
As the use of smart contracts increases on the Bitcoin blockchain, it stands to reason that the flagship digital currency's use cases within the global DeFi market will also increase. We may very well see developers move over from Ethereum, which currently dominates the DeFi space. Certainly, this update will only strengthen the Bitcoin network further!
Have any questions? Contact us at support@coinstop.com.au or book a consultation.