The biggest news in Bitcoin hit over the weekend, with the proposed Taproot upgrade now locked in for a November deployment. As the governing body of Bitcoin consists of all miners operating on the blockchain, confirming an upgrade is a momentous event – one that requires more than 90% of all miners to agree. As of June 12th, more than 90% of completed blocks contained the Taproot signal – an inert additional message added during the creation of a block, which shows the miner’s support for the Taproot upgrade.
Compared to previous upgrades, Taproot’s roll-out has been fairly non-contentious. Bitcoin’s previous upgrade, which involved the introduction of Segregated Witness, or SegWit occurred in 2017. The controversy boiled around the SegWit release, ultimately causing the Bitcoin/Bitcoin Cash schism that would later lead to the Bitcoin Cash ‘Hash War’. Taproot’s fairly innocuous upgrade avoided this unnecessary drama – with most advocates agreeing on the terms of the upgrade.
What does Taproot Change?
Taproot fundamentally changes how transaction contracts work on the Bitcoin blockchain. Rather than an utterly transparent series of operations, users will now be able to show only the end-point wallets involved with complex logic gates. While this won’t impact most basic users, it will allow for more complex second-layer solutions such as the Lightning Network.
Users that wish to add variables to their transaction – such as allowing two or more potential resolutions – no longer need to show the ‘failed’ alternatives after transaction completion. Further, the method by which Taproot accomplishes this reduces the necessary space required for the contract – creating more available space in each block. This should help reduce transaction fees for BTC, as more transactions can fit in each block.
Taproot also brings the introduction of Schnorr Signatures – an alternative to the current Elliptic Curve Digital Signature Algorithm in use today. Schnorr Signatures represent a complete upgrade from ECDSA – but at the time of Bitcoin’s genesis block, they remained under a patent. That patent expired in 2008, paving the way for their eventual adoption alongside Taproot.
Schnorr Signatures provide a different method for generating keys. Multi-signature transactions through ECDSA expose all participants at the point of execution – where Schnorr combines these disparate identities into a single key and keeps those identities safe. In this way, outside observers can only see the start and endpoint of a transaction. Schnorr Signatures allow for a variety of upgrades further down the line – allowing Bitcoin to continue advancing.