Taproot - Largest Bitcoin update in four years
It’s finally here – long-awaited Bitcoin network upgrade, Taproot, has just launched.
Bitcoin is constantly making small updates to its network, but Taproot is its largest in four years.
What’s new with this upgrade?
The Taproot update promises better privacy and greater efficiency when performing transactions on the Bitcoin network. An additional, and for many people much more important, feature will unleash the potential to run more advanced smart contracts on Bitcoin’s blockchain. A smart contract is a program, or script, that is stored in a blockchain and executed when a transaction is performed. Taproot will also give developers a much richer toolbox to work with as they continue to build the network.
It’s really exciting to see a major upgrade like Taproot finally get a release! Bitcoin is constantly improving, but we rarely see such an important expansion being made to its scripting functionality. In particular, I think this will mean a lot for people who build advanced multisignature schemes, and for smart contract networks like the Lightning Network. Since this is a so-called soft-fork, Bitcoin will continue working just as it always has, so it will be exciting to see what developers come up with in terms of new functionalities to add to the network people currently use.
- Johan Torås Halseth, Chief Technology Officer at Firi
In short, transactions on the Bitcoin network will be faster, more secure and cheaper, thanks to the introduction of Pay to Taproot (P2TR). But what exactly is Pay to Taproot? This is what’s called a type output. Each transaction on the Bitcoin blockchain consists of cryptographically signed inputs (what’s being sent) and outputs (what’s being received). Put simply, with Pay to Taproot you make your payment to a smart contract or a crypto wallet – and it’s impossible to tell the difference! In addition, these smart contracts may be more advanced than what Bitcoin was able to offer in the past.
Pay to Taproot is more efficient for the Bitcoin blockchain because Bitcoin used to use outputtypes that use what we call the “Elliptic Curve Digital Signature Algorithm” (ECDSA) which creates a signature from the private key that belongs to one specific bitcoin wallet. This ensures that the cryptocurrency can only be used by its rightful owner. Pay to Taproot, on the other hand, will add so-called Schnorr signatures.
Schnorr signatures take up much less space on the Bitcoin blockchain than ECDSA signatures when executing advanced scripts. That’s because the Schnorr signing algorithm is linear, which means that several signatures for the same message can be combined into a single signature. Transactions like these, involving several signatures, will consequently require much less data with Schnorr, which also makes the system both faster and cheaper. On the blockchain, the distinction between transactions with several signatures and transactions with a single signature will become blurred, leading to better privacy for users.
These multisignatures that can be combined into one signature are also a game changer for smart contracts on the Bitcoin blockchain. We know smart contracts best from Ethereum, but with the Taproot update, Bitcoin is also getting much of the same functionality. Smart contracts can theoretically be used for many different transactions – the only limit is the developers’ imagination!
Want to learn more about Bitcoin? Why not start here!
Want to buy bitcoin?
You can buy bitcoin at firi.com. Register today with Vipps!
Remember that buying and selling cryptocurrencies involves high risk, and that historical returns are never a guarantee of future returns.