But, what exactly is Taproot?
Read on to find out what Taproot is and how it will affect Bitcoin.
What is Taproot?
Taproot is a soft fork that helps improve Bitcoin’s scripts, increasing privacy and improving factors associated with complex Bitcoin transactions, such as multisig transactions.
The protocol upgrade was proposed in January 2018 by Gregory Maxwell, Bitcoin’s Core developer. According to Maxwell’s proposal, Taproot would involve several cryptographic tools that would improve privacy for Bitcoin users.
Pieter Wuille, Bitcoin’s Core developer, created a pull request to have Taproot added to the Bitcoin Core library. Wuille’s pull request was incorporated into the Bitcoin Core library in October 2020. While the integration was a success, the upgrade cannot be fully deployed unless the node operators adopt Taproot’s new consensus rules.
Although Taproot is usually viewed as one upgrade, it actually isn’t. It’s composed of three different Bitcoin Improvement Proposals (BIPs) known as BIP 340 (Schnorr signatures), BIP 341 (Taproot), and BIP 342 (Tapscript).
For Taproot to be successfully implemented, the three BIPs mentioned have to be merged. Additionally, the three BIPs are collectively known as BIP Taproot. Each BIP will play a crucial role in ensuring Taproot is a success.
How Will Taproot’s BIPs Impact the Bitcoin Network?
BIP 340 (Schnorr Signatures)
BIP 340 suggests the introduction of Schnorr signatures for the Bitcoin blockchain. A Schnorr signature is a digital signature scheme that is popularly known for its simplicity.
Schnorr signatures, when used, develop short digital signatures that are efficient and help maintain a high level of security. The proposal details how signatures and public keys created using the Schnorr signature can be encoded, resulting in space-saving for the blockchain.
Its support for aggregation also means that it can produce a single unique signature by combining multiple keys inside any given complex Bitcoin transaction.
BIP 341 (Taproot)
Taproot, or BIP 341, focuses on how the Schnorr signatures can be incorporated into the Bitcoin network via the utilization of Merkelized Alternative Script Trees (MAST).
The main advantage of the MAST data structure is that it supports the secure verification of data in large pools. With BIP 341, users will be able to spend their Bitcoin via a new script type, which will ensure that all taproot outputs appear like simple outputs.
BIP 342 (Tapscript)
Tapscript or BIP 342, is concerned with adding and updating opcodes. This will help verify Schnorr signatures and Taproot spends.
How will Taproot Change Bitcoin?
There are several benefits that the Taproot protocol will contribute to the Bitcoin cryptocurrency.
i) Improved Privacy
A key aspect for any cryptocurrency holder is privacy. The Taproot upgrade will mean that all transactions appear the same regardless of whether it’s a multi-sig, smart contract, etc., adding a great deal of privacy to the Bitcoin network.
ii) Space-Saving for the Blockchain
Taproot outputs will consume less space on the blockchain compared to pay-to-public-key-hash outputs. The amount of data that will be stored and transferred on the blockchain will reduce, resulting in significant space-saving on the Bitcoin blockchain. This will in turn lead to higher throughput, culminating in faster on-chain transactions.
iii) Lower Transaction Fees
Taproot’s support for aggregation means that the transaction data for completing a complex Bitcoin transaction will be greatly reduced. Because only one key will be created, the transaction costs will be greatly lowered.
iv) Enhanced Robustness
Schnorr signatures are a lot more secure than ECDSA signatures. With Taproot, the signatures will no longer be malleable, removing the possibility of a double-spend.
v) Advanced Complex Scripting Functionality
Taproot provides greater functionality when it comes to complex scripting, allowing for Bitcoin to be locked to several scripts. With it, developers will be able to create other greater functionalities on top of the Bitcoin network.
With the most anticipated aspect of the Taproot upgrade being the privacy that it will bring to the Bitcoin network, there is a possibility that once it gets broadcasted, it could have a positive effect on the price of bitcoin.