This is the first major Bitcoin update in four years. Despite being the world’s most popular cryptocurrency, during this time we had not seen any improvements. That will change next November, when Taproot, an update for Bitcoin that promises a leap in privacy and transaction efficiency, is scheduled to go into effect.
It was in 2015 that Segwit (Segregated Witness) was proposed, a slight variation of Bitcoin that allowed network load to be “relaxed.” This year another of these ‘soft work’ updates will come into action. Taproot has been accepted these days by the Bitcoin community and will come with important changes. We explain what they consist of.
As described by Pieter Wuille, one of the developers of the Bitcoin core: “the activation is automatic at block 709632; it is expected around November 14, 2021. Taproot is the first consensus change since Segwit was activated in August 2017.”
What’s changing in Bitcoin with Taproot
The main change to Bitcoin is related to the digital footprint each person leaves on the transaction. Starting in November, it will switch to Schnorr signatures, which make multi-signature transactions unreadable.
Bitcoin currently uses a digital signature algorithm created from the private key, the unique sequence related to each transaction. Being blockchain-based and public, anyone can monitor the transaction. Now Bitcoin is looking to improve privacy with P2SH and MAST.
The taproot will allow “hiding” the moving and added parts of multiple transactions to make them look like a single transaction. In other words, in complex transactions, the information will be unified under the same identifier, which will allow adding more privacy in some aspects, while maintaining the public reference.
The update promises improved efficiency by reducing the amount of data to be transferred and stored on the blockchain. That is, the information in each block will be better compressed. There will also be a higher transaction rate per block, which will ultimately result in lower transaction fees.
At the security level, signatures will no longer be “malleable”. Right now it is technically possible to modify the signature before the transaction is confirmed, which exposes it to potential attacks. With Taproot, this will change which will add another layer of security to Bitcoin.
Getting closer to Ethereum with smart contracts
Smart contracts are scripts, codes associated with money. The basis for being able to create applications and tools based on blockchain. Although Bitcoin is the most popular cryptocurrency, in this field Ethereum and its future version 2.0 have a head start.
Bitcoin wants to close this gap. With the improvement in block efficiency, Bitcoin wants to improve its potential in the world of decentralized finance (DeFi). A position from which it is now far away, where most experts agree that Bitcoin requires too many resources and time to implement these ‘smart contracts’.
The world of cryptocurrencies is moving at a furious pace. Fortunately, the advances and movements are not only coming from the financial side, there is also a lot of work on the technology behind it.
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