Taproot and its advantages for Bitcoin
Taproot translates as root, but it has little to do with a plant, it’s a metaphor for how it works. It is rather an algorithm update that hides some details of the transaction, “burying” them like a seed.
This is one of the most important Bitcoin updates that has happened since 2017. Then a hard fork was created, which we all know as Bitcoin Cash.
However, Taproot did not turn out to be as difficult to understand or tough as it was in the days of Bitcoin Cash. However, let’s figure out what we are talking about, and how it affected the largest blockchain in this sector.
According to Coinmarketrate.com, the Bitcoin blockchain consists of computer code, to put it simply. Therefore, when we “send” BTC, we associate these coins with a code.
This code tells the miners what to do with them. The most common thing is that a private key is attached to them, which will allow us to eventually spend BTC.
But not everyone knows that with the help of Bitcoin, you can make more complex transactions, even perform something similar to smart contracts.
They allow us to create transactions that require a number of private keys or even a combination of them. We can also set time periods to block cryptocurrencies before a certain date and time.
The problem with these transactions is that they are publicly available on the blockchain, which means that we have a lot of information that takes up a lot of space. In addition, there is information revealing details about the people involved.
There are companies tracking this information, such as CipherTrace and Chainalysis, and it is very easy for them to get hold of people’s data. Governments do it too. What kind of privacy can we talk about?
Taproot comes to the rescue
Using this new enhancement, the parties involved in the transaction cooperate to make these complex transactions look as if they were standard. That is, as if we would normally transfer Bitcoins from one person to another.
This is achieved by creating a new public key, which is ultimately a combination of signatures into a new key. This is an algorithm called Schnorr signatures.
For complex transactions, there are some important advantages that you can already imagine:
- This will significantly improve privacy by reducing the amount of information needed.
- Less information also means lower costs. After reaching record highs in this regard.
- This improvement extends to other applications using temporary contracts, such as CoinSwaps, which mixes Bitcoin transactions to hide where cryptocurrencies come from and where they go.
This also implies an advantage for other applications, such as the Lightning Network, which uses a secondary blockchain external to Bitcoin to carry out batch transactions. Thanks to Taproot, we can expect more privacy.
The creator of this idea concluded his sentence with the words:
‘I believe this update will provide the maximum possible set of anonymity for fixed-party smart contracts, making them look like the simplest payments.”
Whose idea is this?
There is always a very long way from an idea to practice, and in the case of Bitcoin, it is no different. This proposal was made in 2018 by Gregory Maxell, a developer at Bitcoin Core, where he was once the CTO.
Bitcoin Core is the most important Bitcoin client software that allows you to interact with the blockchain. If someone downloads this software, they can confirm transactions on the cryptocurrency blockchain.
The adoption stages imply that Bitcoin miners, those who have to mine new blocks on the network, should have signaled support for this improvement within 2 weeks.
This period is not arbitrary, it is approximately equal to the time it takes to mine 2,016 blocks, and it is used to calculate the difficulty of mining by measuring how quickly or slowly miners can find a solution for new blocks.
In order for this improvement to be accepted, 90% of miners were required to include a variable known as a “bit signal” in the blocks. If no agreement had been reached during this period, then a second chance would have been given in two weeks, which would have ended on August 11, 2021. But the miners unanimously supported Taproot, and it started working on November 14, 2021.
Yes, there were incidents with update support. Obviously, there were technical problems with this vote when several miners reported that they could not integrate their vote into the blockchain. But that’s all.
A large number of people are interested in the Bitcoin project, which means that everyone should agree. From miners, to developers, from individuals to institutions. That is why massive support is needed to avoid a return to another hard fork.
The process of making improvements to the Bitcoin blockchain is that anyone can make a proposal known as BIP.
For example, BIP No. 9 is a proposal that makes the approval of new upgrades dependent on the support of miners. Although there is also BIP 8, which pushes for these updates without the need for miner support.
In BIP 9, community members create so-called “Quick Tests” at a public meeting. A period of 3 months during which miners must signal their agreement or disagreement with the activation of this offer (90%).
However, this process is not straightforward, as there are always confrontations. For example, from a developer named Like Dashjr, who believes that consensus has been reached in accordance with the BIP 8 standards.
This developer has already created his own client, which is a fork for other members of the community. You need to be very careful not to get confused in them.
Then, before the vote, security expert Edward Snowden, known for releasing confidential information to the US NSA, said that Taproot could be even worse for Bitcoin privacy. However, many Bitcoin developers did not agree with this.
The overwhelming majority of miners demonstrate their support for the update by voting 98 percent, which gave them many opportunities.
Currently, this proposal seems to be quite popular. This can make Bitcoin behave like a kind of digital money with fewer failures.
The Latest Major Bitcoin Update
The last major update – Segregated Witness (SegWit) – was made in 2017. The idea is to delete some of the signature information to make room for other operations.
Another major update was Bitcoin Cash, which, by offering a block size, caused a big split in the community. On the one hand, there were those who believed that the size was correct, and on the other – those who wanted each block to include more transactions, reducing the commission and making the network faster.
Fortunately, there was no such separation with Taproot as with Bitcoin Cash, and there were not so many detractors of this improvement. And now the main goal is to achieve its correct implementation.