Bitcoin big upgrade after 4 yearsNovember 26, 2021
Taproot, Bitcoin’s biggest upgrade in four years, was activated on November 14, prioritizing the privacy and efficiency of transactions.
Taproot is important because it opens up a lot of opportunities for entrepreneurs and businesses interested in expanding the utility of Bitcoin, is what Alyse Killeen, founder of a research firm specializing in mining money. Stillmark issue, told CNBC.
Unlike the 2017 SegWit upgrade that was likened to the final civil war, because of controversy and internal division among miners, Taproot received more than 90% consensus. In June, Taproot got 1,815 out of 2,016 signal blocks agreeing. Blocks represent the capacity of Bitcoin factories with the largest hashrate in the world.
The Taproot update changes related to three issues: Optimization, Privacy, and Smart Contracts.
In it, the digital signature is optimized in Bitcoin transactions. Currently, the Bitcoin network uses something called the Elliptic Curve Digital Signature Algorithm, called Elliptic Signatures, which allows the creation of digital signatures from a private key that controls the Bitcoin wallet and ensures that only the Bitcoins contained therein. Only legal owners can use.
According to Torre, the Schnorr Signature system does not enhance the anonymity of individual Bitcoin wallet addresses on the public blockchain. However, it makes simple transactions almost indistinguishable from complex transactions, including multi-signature transactions.
Thanks to Taproot, concurrent transactions are also easier due to the ability to aggregate public keys and signatures. For example, if an exchange sends 500 concurrent transactions to 500 people, they can compress all 500 public keys into one and 500 digital signatures into one.
New additional signatures on the Bitcoin network are also instrumental in changing smart contracts – agreements between two blockchain-based partners. Theoretically, smart contracts can be used for any type of transaction. Taproot makes transactions cheaper and smaller in terms of space occupied on the blockchain.
According to the famous Bitcoin developer Hampus Sjöberg, to do this, the system needs the Merkelized Abstract Syntax Tree (MAST).
Smart contracts can now be created both on Bitcoin’s core protocol layer and on the Lightning Network, a payment platform that enables instant transactions. Smart contracts executed on the Lightning Network often make transactions faster and less expensive.
According to Sjöberg, the addition of Taproot next to the Lightning Network is important for the longevity of the Bitcoin network, helping network nodes no longer place too much burden as well as higher payment volumes than before.
In addition, experts say that as more and more programmers build smart contracts on the Bitcoin blockchain, the network could become a new force in the world of DeFi (decentralized finance). Currently Ethereum dominates as the blockchain of choice for these decentralized applications, aka dApps.
After the announcement of Taproot, cryptocurrency miners and developers responded positively. Some expect the price of Bitcoin to continue to increase sharply as in 2017. Four years ago, Bitcoin increased from $4,000 to $20,000 per coin after the SegWit upgrade. Currently Bitcoin price is at 64,000 USD.