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What Is Bitcoin Taproot?

Taproot is a soft fork of the Bitcoin blockchain that enhances Bitcoin scripts to enhance privacy and improve other factors related to complex transactions. Taproot allows users to use Bitcoin scripts in various ways to enhance privacy, scalability, and security. 

The Taproot upgrade proposal was released by Bitcoin Core developer Greg Maxwell, who has been a Bitcoin core developer since 2011, in January 2018.  Three years later, on June 12, 2021, with the support of miners, the threshold of 90% of the mined blocks was reached. 

Taproot was activated on November 13. The upgrade happened at block 709,632 at 5:15 UTC time on Sunday, mined and replayed by F2Pool, marking activation of the first major upgrade to the network’s code since 2017’s introduction of Segregated Witness. 

Taproot is one of the most anticipated technical updates for Bitcoin since the introduction of SegWit, which removed signature data from Bitcoin transactions. Taproot’s goal is to change the way Bitcoin scripts work, in order to improve privacy, scalability, and security. Experts point to Taproot’s practical increase in the privacy Bitcoin offers, though the technology will remain pseudonymous and anonymous. 

The Taproot update not only means more privacy and efficiency in transactions but will open up the potential for smart contracts that can be used to eliminate intermediaries from transactions on the bitcoin blockchain. Another benefit of Taproot is the fact that signatures will no longer be malleable, which has been identified as a security threat on the Bitcoin network.

According to Bitcoin miner Alejandro De La Torre, Taproot will replace ECDSA signatures with Schnorr signatures, improving privacy, scalability, security, and lower performance. Schnorr signatures, which make multi-signature transactions unreadable. While this will not anonymize your personal Bitcoin address on the public blockchain, it will make simple transactions indistinguishable from more complex multi-signature transactions. The privacy advantage, furthermore, will extend to applications that use time-bound contracts, such as CoinSwap, which mixes bitcoin transactions to hide the origin and destination of coins. 

For example, Bitcoin with Taproot can make a Lightning Network channel transaction, a peer-to-peer transaction, or a complex indistinguishable smart contract. For these specific types of complex transactions, Taproot is expected to improve privacy by reducing the amount of data required to complete them, thereby lowering transaction costs, which have become much higher as Bitcoin has become more popular. 

When using Taproot, all of these complex transaction types will appear as simple single sign output and will not show all the possible scenarios that can be used to unlock the output after the transaction is confirmed.

Second, the Taproot update compresses the complex conditions required for transactions into a single row of data, the so-called Merklized Alternative Script Tree (MAST) of the blockchain code. This makes it a more streamlined process. The update introduces Pay-to-Taproot (P2TR) as a new method of transacting Bitcoin, saving space on the blockchain. 

By combining public keys and signatures in Threshold Public Keys and Threshold Signatures, a multi-signature transaction can be made indistinguishable from any regular transaction. With the introduction of Schnorr signatures and key aggregation, multi-signature contracts are no longer different from single-signed contracts. 

In its explanation, River.com outlined that, in order to make Pay-To-Taproot transactions work, BIP 342 added new scripts that “used to verify Taproot credit and Schnorr signatures, collectively referred to as Tapscripts.” 

Taproot simplifies future bitcoin updates by reforming the bitcoin scripting language. Key features of Taproot is a proposed update for Bitcoin that will introduce several new features. Taproot integrates the Schnorr digital signature scheme into Bitcoin by updating the underlying Bitcoin cryptography. 

Taproot builds on the SegWit update to improve bitcoin privacy, lower transaction fees, as well as empower Bitcoin developers to explore the world of Bitcoin smart contracting. Many expected the Taproot update to be an important first step towards addressing Bitcoin’s lack of privacy and other related issues. The update, known as Taproot, will improve the efficiency and privacy of the network and could accelerate the sharp rise in bitcoin prices.

The key benefit of Taproot is that it will equip the Bitcoin network with a simpler smart contract protocol. Smart contracts running on the Lightning Network usually result in faster and cheaper transactions. By introducing a new type of address, the upgrade will allow users to save on transaction costs: the more congestion the network, the more the user will actually save. The update offered by Taproot has a number of benefits for Bitcoin users. 

Taproot offers all the benefits of MAST, which is a method of using a merkle tree to store the various user-selected conditions that must be fulfilled in order for the encumbered bitcoins to be spent. Using a merkle tree empowers the spender to select which one of the conditions they’ll fulfil without the need to disclose the details of other conditions to the blockchain.

To learn more, read Gregory Maxwell’s original Taproot proposal or watch Peter Wille’s presentation on Taproot. Many of the most prolific Bitcoin core contributors contributed, including Peter Wille, Anthony Towns, Johnson Lau, Jonas Nick, Andrew Poelstra, Tim Ruffing, Rusty Russell, and Gregory Maxwell.

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