As planned, Taproot saw the light of day on November 14 with block 709.632. This is a breakthrough for the Bitcoin blockchain, whose updates are particularly rare. Despite the upgrades, the event is controversial.
What does Taproot bring to the table?
The proposal to update the Bitcoin network called Taproot had its origins back in January 2018. It was put forward by one of the core developers – Greg Maxwell. It was finally approved only in June this year. This is due to the decentralized form of Bitcoin and the fact that a vast majority of miners must approve the changes. Thus, thanks to the soft fork, for the first time since 2017, the oldest of the cryptocurrencies has experienced an upgrade. And these have generally brought with them many benefits.
Taproot represents several significant changes. Some of them are privacy and security, others are scalability and the implementation of smart contracts.
Until now, Bitcoin has relied on the Elliptic Curve Digital Signature Algorithm (ECDSA), which secures transactions with a private key. As of now, Schnorr signatures have been incorporated into the network. It is through these that transactions will gain more privacy. However, it is worth noting that they will not have much in common with the functioning of traditional privacy coins.
Another important change is the reduction of the cost of the actions performed on the network, as well as the ability to create smart contracts. There are claims that these changes may significantly hit networks such as Ethereum and its biggest competitors. It is worth debunking these rumors and honoring that Bitcoin will allow the creation of much simpler contracts than Ethereum has, making the second largest cryptocurrency not necessarily feel threatened.
Prospects for Bitcoin
Although the ECDSA system has never been breached before, thus already guaranteeing security in itself, the current update and implementation of Schnorr signatures further enhances it. Bitcoin thus has the power to become much more attractive to investors. Smart contracts, which probably won’t appear much in Bitcoin’s network, can work in a similar way. However, the ones that will appear in it will be secured through the world’s strongest blockchain.
It is also worth noting that Taproot raises some controversies and concerns. Their reason is the aforementioned privacy. Some market observers see in it a pretext that could be used by governments to increasingly effectively oppose Bitcoin. This is crucial in view of the simultaneously emerging statutory changes to the “Infrastructure Bill” in the United States. As we know, the bill impacts the cryptocurrency market in a way that makes it more transparent to regulators such as the IRS. Meanwhile, the bitcoin community has chosen the opposite direction. It remains to be seen what consequences this will bring.