How will it change bitcoin (BTC)?
The Taproot update will change the history of Bitcoin (BTC) once and for all. It is scheduled to be rolled out in November 2021. For the time being, most miners have agreed to carry out the update of the entire network, which is a revolution of sorts. The support of all stakeholders throughout the process, including miners in particular, is unquestionable.
Segwit, the last major Bitcoin update
It’s hard to believe given the explosive growth of Bitcoin’s (BTC) popularity in recent years, but the last major update to this ecosystem was as much as 4 years ago! It was called Segregated Witness, or SegWit for short and it took place in 2017. The main purpose of this update was to increase the processing speed of the transaction carried out with the cryptocurrency, so that it could be used not only as an investment instrument, but also as a usable currency. In order for Bitcoin to gain the characteristics of a usable currency, larger blocks were needed to increase the speed of transaction processing. This change resulted in the hard fork that created Bitcoin Cash. After so many years without significant changes, another challenge awaits Bitcoin: the Taproot update.
How are changes made to the Bitcoin blockchain?
Bitcoin (BTC), as the world’s most popular cryptocurrency, is a huge undertaking. Its stakeholders are not only miners or investors, but also developers, companies, and individuals. For this reason, for a big change to come to fruition and be implemented effectively, it must have a lot of support. So specific thresholds of support are set for each change. In the case of the Taproot update, this threshold is 90%. A potential change is signaled with a so-called “BIP”, a proposed change to the source code. Miners could express their support for the improvement within 3 months in this specific BIP. If the change reaches the required threshold of support it is activated.
Taproot update – what will it bring to the Bitcoin ecosystem?
It is worth mentioning that the Taproot update has already been approved, so it has reached the required threshold of support by miners. Stakeholders are expecting several benefits from it. First, the Taproot update is expected to provide better privacy and transparency in transactions. Second, for the first time, smart contracts functionality will be added to the Bitcoin (BTC) blockchain in a simpler form than before. This feature is already available in other cryptocurrencies, with Ethereum being one example.
Taproot – benefits
With the Taproot update, it is expected that the fees charged for a transaction conducted on the Bitcoin (BTC) blockchain will decrease. This is because these fees are charged based on the space allocated on the blockchain, and smart contracts as they currently exist take up a lot of it. Taproot aims to change that. The key to the change is to combine the public keys of the users participating in the smart contract and then create a new public key. This creates a unique signature, called a Schnorr signature. The effect of this is to make the complicated processing of Bitcoin smart contracts, in essence, look like direct payment processing between two public keys.
