The Bitcoin network just went through its most significant change in four years - the Taproot upgrade. The upgrade was implemented successfully and without incident on Sunday, 14 November 2021.
Long-time Bitcoin users may remember the 2017 Segwit upgrade, a contentious event that ignited extreme division amongst community members and became known as 'the last civil war'. Fortunately, the Taproot upgrade has received almost unanimous support, offering several improvements that benefit the entire community.
What's in the Taproot upgrade?
For the vast majority of Bitcoin investors, the Taproot upgrade changes very little. Buying, selling, and trading Bitcoin remains the same, and the price of Bitcoin hasn't been notably affected. We should benefit from a slight improvement to transaction times and fees, stronger privacy, and a network that is now more secure than ever.
So what’s changed?
Improved Smart Contracts
The key ingredient that the Taproot Upgrade has injected into Bitcoin is TapScript, an improved scripting language that simplifies smart contracts. Those familiar with Ethereum will know that smart contracts are a powerful force in the crypto space and now Bitcoin can efficiently harness this power too.
Smart contracts allow users to set certain conditions that must be met before a transaction is carried out. Just like in the real world, for two parties to carry out a successful business transaction, legal contracts must be drawn up to specify the conditions. In the world of digital currencies, smart contracts offer similar functionality but require no lawyers or third-party intermediaries to verify them.
For blockchain developers, this upgrade is significant because it changes Bitcoin from a somewhat static digital currency into a more programmable currency. Now, decentralized applications can be more easily built on the Bitcoin network, providing a wealth of functionality to individuals and businesses alike.
The Taproot upgrade has also introduced a new type of scripting that improves the privacy of smart contracts, called MAST (Merkelized Abstract Syntax Tree). With MAST, the conditions of a transaction are hidden and only the conditions that are met are revealed when the transaction processes. This added privacy equates to better security for all users.
In addition, this improves privacy on the Lighting Network (LN) by making all LN transactions look the same as normal Bitcoin transactions. Lightning is an additional layer to the Bitcoin network that allows for faster, cheaper transactions between two parties that interact frequently.
Another significant element of the Taproot upgrade is the introduction of Schnorr signatures. These add an extra layer of privacy and increased simplicity when using multiple signatures (multi-sig) on a single transaction.
This upgrade ties in with the improvements to smart contracts, which use multi-sig technology. With Schnorr signatures, individual user addresses won't be exposed when involved in multi-sig transactions, helping to keep you safe from bad actors on the network.
Overall, the Taproot upgrade makes Bitcoin a much safer network for users while giving developers the ability to build useful business applications on it.
In the long-term, this will equate to new users feeling more confident in adopting Bitcoin and businesses finding new ways to use the network. It's a win-win for everyone and positive news for crypto users around the world.