On Sunday at block height 709,632, one of Bitcoin’s most anticipated upgrades was released. It is Bitcoin’s first protocol upgrade since 2017, and so it is a major milestone to the network, and investors are eager to see how it impacts the blockchain in the coming days.
Taproot will bring the Schnorr signatures to the table, which will make transactions with Bitcoin more private, less expensive, and more efficient. At the same time, the upgrade will be coming with a major feature which is enabling Bitcoin to execute smart contracts on the blockchain. Learn more here as well.
Many investors are already anticipating what all these improvements could mean to Bitcoin’s price. So, if you are an investor with an eye on Bitcoin, you should know about this new upgrade and what it could mean to the Bitcoin community. Let’s have a quick ride to know important things about the new Taproot upgrade and its impact on Bitcoin.
Taproot Is a Collection of Three Separate Upgrades
Yes, the Taproot upgrade is actually a collection of three interconnected Bitcoin upgrades meant to happen simultaneously. These upgrades are referred to as Bitcoin Improvement Proposals (BIPs). So, let’s see what each of these upgrades are.
#1: Schnorr (BIP 340)
This is the first upgrade in the taproot upgrade. It proposes the introduction of Schnorr signatures to the network. Schnorr signatures are a digital signature scheme that is designed to replace the current cryptography that is being used on the Bitcoin blockchain. Schnorr signatures are faster, less data-intensive, and more secured, and it’s going to bring all of those features into the Bitcoin blockchain.
#2: Taproot (BIP 341)
This will be bringing the new Pay-to-taproot proposal, which is a new way to send Bitcoin with more privacy and flexibility. The upgrade will also be using Merklized Alternative Script Trees (MAST), which will help bring complex Bitcoin transactions into just a hash. The result of this will be reduced memory usage, transaction fees, and improved scalability on the Bitcoin network.
#3: Transcript (BIP 342)
This is the last upgrade in the Taproot upgrade and it is an update to the original scripting language of Bitcoin. The new scripting language enables P2TR transactions and utilizes Schnorr signatures to improve flexibility and efficiency on the network.
What’s The Adoption Timeline of Taproot Upgrade Like?
The upgrade was first proposed on June 12, 2021. That was the time the upgrade reached a 90% consensus among miners. And from there, November was proposed at the time the upgrade would be fully launched as a soft fork to Bitcoin’s protocol.
Because the taproot upgrade is coming as a soft fork, it is not creating a separate blockchain from what has already been in existence. Instead, it will be working in compatibility with older versions of bitcoin.
Just as it was with the last major upgrade on the Bitcoin’s network – the SegWit upgrade, the taproot upgrade is also expected to slowly grow over a period of years. Not everyone will be willing to opt in on this upgrade immediately, which was the reason the adoption might be on a slow and steady thing too. But in probably the next 2-4 years, the upgrade would already be widely accepted.
What Impact Would the Taproot Upgrade Has On Bitcoin?
It is obvious that the taproot upgrade will bring many goodies to the Bitcoin network, but not many people can rightly place their hands on which areas this would produce the most impact. Let’s take a look at some ways it will impact Bitcoin:
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Enhanced smart contract functionality
This would be the most important change we would be expecting with the new taproot upgrade. Bitcoin will be able to host smart contracts on its network. One of the major differences between bitcoin and other newer blockchains like Ethereum is the ability to host smart contracts. But with Schnorr signatures, bitcoin will also be able to host smart contracts on its network.
Even though with the upgrade, bitcoin may still not be able to be as flexible as Ethereum when it comes to hosting smart contracts, but it is obvious that the gap will now narrow. That will hence make bitcoin more suitable for day-to-day applications.
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Improved privacy
With the taproot upgrade, there will be an increase in transaction privacy. The Schnorr signatures will make multi-signature transactions compressed into just a single, standard transaction. That means multi-signature transactions will be more indistinguishable from simple transactions. What that means is more privacy for multi-signature transactions.
However, as interesting as this may be, some people are already concerned that it may increase government concern over bitcoin and illegal activities such as money laundering and tax evasion may increase.
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Cheaper transactions
Yes, one of the things the Schnorr signatures will do is to reduce the amount of data needed for multi-signature transactions. That means less time and energy will be needed to complete such transactions. As a result, transactions fees will be reduced, leading to cheaper transactions on the bitcoin network.
Final Note
The taproot upgrade is an update that has been long-awaited in the bitcoin community. The upgrade is finally here and it came with Schnorr signatures. That means we would likely be seeing a whole lot of improvements in terms of scalability, security, and privacy on the Bitcoin network.
Smart contracts will now be possible and more effective on the bitcoin network, which will make it even more suitable for everyday applications.
However, you should also remember that all cryptocurrencies come with risks due to their speculative and volatile nature. So prioritize buying Bitcoin safely and in addition to that, always take extra caution when buying and investing in Bitcoin. But really, better days are upon all Bitcoin investors already!