Taproot: Bitcoin's latest upgrade
Bitcoin, world's top cryptocurrency, has received its latest upgrade by adoption of Taproot after four years of no upgrade activity.
With Taproot, Bitcoin received its new upgrade on 14 November 2021 that will allow developers to scale the network while improving security and privacy.
The upgrade was approved by over 90% of miners as they have agreed to it and thereby the upgrade was locked in June 2021.
A programmed waiting period between lock-in and activation has since given node operators and miners time to fully upgrade to the latest version of Bitcoin Core, 21.1, which contains the merged code for Taproot. Only once they do so will they be able to enforce the new rules making it possible to use the new type of transaction.
A computer running Bitcoin Core is called a node. There are about 10,000 known nodes in the network, but probably 40-50,000 unknown ones. Maybe even more. Nodes are spread all over the world.
What is Taproot?
Taproot is one of the most important Bitcoin updates ever planned. It is also the first major Bitcoin update in four years. In 2018, Greg Maxwell, Bitcoin core developer since 2011 has proposed it. Since then, the three Bitcoin Improvement Proposals (BIPs) that codified Taproot were written by Pieter Wuille, Tim Ruffing, A.J. Townes, and Jonas Nick, and merged into Bitcoin Core in October 2020.
What are Bitcoin Improvement Proposals?
It is a body that decides on all the upgrades that are included in the Bitcoin network.
The first-ever BIP was done by Bitcoin developer Amir Taaki in August 2011. It is called BIP 0001 and it describes the structure of BIPs, how they are handled, and how they are finalized.
Any idea to improve & enhance the Bitcoin network is first made to BIP. BIP then presents the idea to a larger audience in one of the discussion channels. After this, developers and other community members throw in their thoughts on the proposal. It’s very important that the proposal is largely accepted at this point.
If the idea gets most of the community behind it, there will be programmers and testers who want to participate. It’s like a snowball effect. If the idea is refused by many, it’s almost no point to waste further resources on it.
Nodes have the highest authority in the Bitcoin network. If you can’t get node operators behind your idea, it will never be implemented to the network.
All BIPs aren’t equally important. Some are generic suggestions, while others can modify the core components or even the consensus rules.
The more important the BIP is, the more difficult it is to get implemented. The critical BIPs have to get almost an unanimous consensus. They are also developed for several years.
After the implementation, Taproot will successfully increase security, and also allow flexibility and scalability with the introduction of a new language that is ever-expanding.
Every transaction will now use SigHash (Signature Hash) instead of the Elliptic Curve Digital Signature Algorithm (ECDSA), which is currently used by the Bitcoin network. Once a SigHash is applied, the information becomes immutable (unchangeable). If the information is changed, the transaction loses validity. Nothing can be changed without destroying the SigHash. Previously, a small amount of information could be changed through “malleability” that would not result in the transaction losing its validity.
Superior Security is achieved in the aggregation process because on-chain heuristics (data tracked) will not be able to discern the difference between a multi-signature and single-signature transaction, allowing for more privacy.
In addition to being smaller and faster than ECDSA, Schnorr signatures have the added benefit of being 'linear', a combination that will boost Bitcoin’s transaction privacy and allow for more lightweight and complex 'smart contracts' (an encoded contract with self-executing rules).
Taproot is part of a larger effort by developers around the world on a mission to improve the privacy of Bitcoin because its transaction history is very public. A curious user can look up any transaction ever sent on Bitcoin using a public block explorer such as Mempool.space.
This is still the case with Taproot, but details of some more-complex transactions (often called smart contracts) will be able to be hidden. For example, while right now Lightning Network transactions stand out on the blockchain, Taproot offers the possibility for them to look just like any other transaction, further enhancing transaction privacy.
Here the entire portion of the Bitcoin script is upgraded to integrate the new system with the old one.
Bitcoin Script Update allows the scripting language to use Schnorr signatures and integrates the Merkelized Alternative Script Trees (MAST).
Pay-To-Taproot (P2TR) gives the freedom of choice. You can use either Schnorr signatures or the Merkle root provided in MAST. Satisfy the requirements of your choosing, which allows for cleaner transaction processing when the Merkle tree may not be needed.
Tapscript is a collection of opcodes, which are essentially just lines of codes that execute commands on the Bitcoin protocol that have been updated to make way for the new changes installed by Taproot.
Bitcoin Script has a 10,000-byte script size limit which will be removed, allowing for vastly larger scripts, or Taproot contracts. It also removes the cap for 'opcodes,' which allows for more flexibility for increased features and coding in the future.
Scalability is another area Taproot will be addressing. Currently, due to limited transaction space, the expansion of the Bitcoin network is a huge problem. Developers can’t simply increase this limit without impinging on Bitcoin’s decentralization, so they are always looking for ways to make use of the currently available block space more efficiently.
Taproot will have many positive repercussions for various projects across the ecosystem. For instance, multi-signature transactions, which require more than one out of a group of signers to sign a transaction, will be cheaper and will use fewer data.
This reduction in data size could boost scalability, for example, a multi-signature scheme developed by Blockstream researchers, which requires a number of signatures for one transaction.
With an upgrade after four years, Bitcoin needs to catch other crypto projects that are already scaling. Though it is ahead with other projects with over $1.2 trillion market capitalization, the Ethereum project is not far behind with more crypto projects being built on top of it with a market capitalization of nearly $525 billion.
It is high time for the Bitcoin network to get more projects like Lighting to be built on it so that it is in the race of mass adoption.
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