The 3 Main Reasons Bitcoin’s Taproot Upgrade Is a Game Changer for Crypto

A major upgrade to Bitcoin went live during the weekend of November 13th, 2021, which generated a lot of excitement in the cryptocurrency community. The upgrade is named “Taproot,” and it is Bitcoin’s first significant upgrade since 2017. So, what is Taproot, and what does it mean for Bitcoin users and investors?

What Is The Taproot Upgrade?

Taproot was activated on block number 709,632 on Saturday, November 13th. It was so highly anticipated that even Twitter CEO Jack Dorsey tweeted about it. So, what’s all the fuss about?

Taproot was first introduced by cryptographer and former Bitcoin developer Gregory Maxwell in 2018. It is a collection of three separate upgrades to Bitcoin’s network, all of which will revolve around the introduction of “Schnorr signatures.” A Schnorr signature is a digital signature scheme in cryptography where multiple digital signatures are bundled into one “master signature.”

Before November 13th, Bitcoin used Elliptic Curve Digital Signature Algorithm (ECDSA), which gives users a single private key that allows them to unlock a public key. However, Schnorr signatures actually predate ECDSA—the concept was proposed by mathematician and cryptographer Claus Schnorr, who held a patent for the concept until it expired in 2008.

Taproot is considered a “soft fork” upgrade on the blockchain, which means that it is a protocol upgrade that is backwards compatible with older versions of the protocol. The Taproot upgrade introduces some pretty important new features to the Bitcoin blockchain, too.

1. Smart Contracts



Pixabay stock image of ethereum and bitcoin

Ethereum is the most widely-used blockchain protocol for DeFi and NFT projects due to scalable smart contracts. However, compared to Ethereum, Bitcoin has not been a popular choice for developers looking to launch DeFi projects due to limited smart contract capacity.

MAKEUSEOF VIDEO OF THE DAY

Schnorr signatures that come with the Taproot upgrade will allow the Bitcoin network to execute more complex smart contracts more efficiently and at scale.

That said, Bitcoin won’t suddenly become a smart contract blockchain that competes directly with Ethereum, Cardano, or other popular smart contract blockchains. It still won’t have the capacity to manage smart contract projects you see on those platforms.

2. More Privacy



Pixabay stock image of a padlock in front of a tablet on a table

Next, Taproot will aim to strengthen Bitcoin’s privacy. Bitcoin transactions are known to be very public (hence the creation of privacy coins). Any user can use a public block explorer webpage to look up details of a Bitcoin block, including the time of its transaction, block weight, transaction fees, and even a miner’s information.

“Master signatures” created with Schorr signatures will appear on Bitcoin public block records as a standard, single transaction. Thus, they will look the same as a regular ECDSA transaction, which means more privacy and anonymity to Bitcoin users.

3. Fewer Transaction Fees

Bitcoin’s transaction fees fluctuate dramatically. It currently sits at an average of $2.50 per transaction. However, in April 2021, it reached an all-time high of $62.78, as per BitInfoCharts.

Taproot is expected to keep transaction fees low because Schnorr signatures’ multi-signature feature uses less data than a regular transaction. By combining multiple signatures into one, transactions become time and cost-efficient.

Why Is The Taproot Upgrade Important?

Unlike Bitcoin halving, where Bitcoin’s block supply gets cut in half, Taproot did not send Bitcoin’s price to the moon. Nevertheless, it is still a development worth paying attention to because of its improvements to Bitcoin’s blockchain ecosystem.

Bitcoin’s last upgrade was in 2017 with Segregated Witness or “SegWit,” in which the block size limit on Bitcoin’s network was increased by removing signature data to free up space to enable more transactions on the network.

Bitcoin critics have labeled the cryptocurrency’s post-SegWit era as stagnant. This is due to the perception that it is unable to keep up with new, fast-developing technologies in the space, such as Ethereum’s EIP1559 protocol that “will allow the removal of coins from circulation through the fee schedule in a process called ‘burning.’ Essentially, the gas fee for a block will fluctuate based on usage above or below a standard gas fee.”


However, as Bitcoin researchers have pointed out, Taproot’s activation essentially discredits this criticism and proves that the cryptocurrency is capable of becoming more accommodating and robust.

Bitcoin’s Long-Awaited Upgrade

Taproot received a warm welcome from those in the cryptocurrency space. While it may not mean a lot for some investors, it remains a significant moment for those who are interested in blockchain technology.



Cryptocurrency apps on iPhone

The Top 10 Bitcoin and Cryptocurrency Apps for iPhone

It’s now easier than ever to buy Bitcoin, convert to altcoins, and even invest in ICOs, all from your iPhone with these cryptocurrency apps.

Read Next


About The Author