Any investor in the crypto community knows that privacy, scalability and security are three very important factors that are currently not entirely fixed. However, and thinking about this, Bitcoin, the most popular cryptocurrency in the world, will try to solve all these issues with its Taproot update.
May 7, 2021, | AtoZ Markets - Taproot is the most recent upgrade to how BTC transactions work, and it brings real benefits to Bitcoiners.
Any investor in the crypto community knows that privacy, scalability and security are three very important factors that are currently not entirely fixed. However, and thinking about this, Bitcoin, the most popular cryptocurrency in the world, will try to solve all these issues with its Taproot update.
Taproot update was first proposed in January 2018 by Gregory Maxwell, a Bitcoin Core contributor and former Blockstream CTO, aims to expand the flexibility of smart contracts in Bitcoin. The road to activating Taproot has been a long one, but the developers are making steady progress while continuing to work towards the goal.
In October 2020, Taproot would have already been integrated into the Bitcoin Core "library", following a "pull request" from Pieter Wuille. For the update to be fully implemented, node operators must adopt the new Taproot consensus rules.
How Taproot Works
Pieter Wuille, the CEO of Blockstream and a prominent developer of Blockchain technology, explained that Taproot is built directly on MAST and Merkle Branches.
In his GitHub proposal, he explained that Taproot would allow almost any smart contract construction to include a condition that allows all participants to agree on a result. Participants can cooperate and sign a settlement transaction together, which would save space and increase the privacy of scripts when passing time, Wuille noted.
Taproot has also been designed to improve scalability by allowing transactions to be up to 25% smaller.
This has a double impact for investors, since the mining commissions or fees decrease, and on the other form, small transactions mean that more can fit in the same block, lowering the cost and allowing more transactions to be processed per second on the blockchain.
Better Bitcoin Trading with the Taproot Update
Jameson Lopp, CTO at Bitcoin (BTC) focused firm Casa, recently explained what the Bitcoin (BTC) Taproot upgrade will bring to the world’s largest cryptocurrency network. Lopp confirmed that Taproot is the most recent upgrade to how BTC transactions work, and it “brings real benefits to Bitcoiners.”
As mentioned in the blog post by Lopp, some of the benefits of Taproot for Bitcoin are as follows:
- Reduced transaction fees.” It will be “much cheaper to send a transaction from your Bitcoin multisig wallet.”
- Increased privacy. With Taproot and Schnorr signatures, Bitcoin wallets “with more complex spending conditions, like a multisig wallet or one that uses time-locking, will no longer be distinguishable from simple single signature wallets unless they spend the funds using their “uncooperative / recovery” spending conditions.”
- More wallet functionality. Developers can “work on creating vaulting logic that is better protected against permanent loss by having multiple time-locked redemption conditions.” As an example of this, you could “create a 3 of 5 multisig wallet that ‘gracefully degrades’ to a 2 of 5 wallet if you don’t move funds from that wallet for 5 years.” This would “allow you to recover your Bitcoin even if you lose 3 of your 5 keys! In a situation like this, the privacy benefit of Taproot is important – you wouldn’t want someone else knowing that this is how your wallet is set up simply by looking at your on-chain data.”
The truth of it all is that the world of cryptocurrencies evolves and grows every day, and therefore it's important to remain attentive to everything that can benefit our investments.
Please tell us what do you think about these changes.