Bitcoin Taproot upgrade and all you need to know
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Bitcoin Taproot upgrade and all you need to know

Saudu Clement
Saudu Clement

On June 12, Bitcoin’s Taproot upgrade received enough mining support to lock-in activation. Taproot is undoubtedly Bitcoin’s most significant improvement since the “Segregated Witness (SegWit)” upgrade in 2017.

The governance vote for Taproot conformed to parameters set by “Speedy Trial,” which requires the support of at least 90% of the blocks mined in a designated two-week period to begin the activation process.

As of last week Saturday, 1,815 out of the 2,016 blocks mined had indicated their interest to support the upgrade. With the 90% benchmark met, the Taproot upgrade has been scheduled for November. The upgrade is set to introduce a plethora of upgrades to the Bitcoin network, including improved privacy, scalability, multi-signature wallets, and security.

That being said, let’s take a deeper dive into what Taproot is and how it could potentially transform Bitcoin.

What is Taproot?

Privacy, security, and scalability are three very core issues every blockchain needs to address. While Bitcoin has performed remarkably in the aspect of security, it is an open secret that the leading blockchain falls short on the scalability and privacy scales. Taproot is expected to address these issues.

The upgrade was first proposed by former Blockstream CTO Gregory Maxwell in 2018. It was developed by several Bitcoin Core contributors, including Anthony Towns, Andrew Poelstra, Johnson Lau, Jonas Nick, Pieter Wuille, Tim Ruffing, and Maxwell himself. In October 2020, Taproot was merged to the Bitcoin Core library following a pull request created by Wuille.

Taproot will improve Bitcoin’s scripts, making them potentially more compact, private, and flexible. Consequently, transactions on the Bitcoin network will be able to use more complex functionalities such as multi-signature and timelock releases.

To a large extent, these features are already on the Bitcoin network. However, without Taproot anyone would be able to detect the use of these complex functionalities. Taproot essentially makes it possible to “cloak” all the parts of a transaction that involves these features. So, even if a complex transaction uses any of these features, it will still appear like a single transaction that is indistinguishable from a regular transaction. This could significantly boost the privacy of Bitcoin transactions.

The Taproot upgrade is more or less two upgrades rolled into one. It includes the introduction of Schnorr signatures.

What is a Schnorr Signature?

To many cryptographers, the Schnoor signature scheme is one of the best in the field for its simplicity and efficiency in creating short signatures. It is relatively fast to verify and does not suffer from malleability.

With regards to Bitcoin, the most notable benefit of the signature is arguably its “linear math” feature that enables a new class of smart contracts, where devs can embed a variety of spending conditions by tweaking a signature.

The Schnorr signature scheme was developed by German mathematician and cryptographer Claus Schnorr. Although he protected his algorithm under a patent for several years, the patent officially expired in 2008.

Despite its benefits, Bitcoin’s pseudonym founder Satoshi Nakamoto adopted the Elliptic Curve Digital Signature Algorithm (ECDSA). At that time, ECDSA was already widely used, compact, open-source, and well-understood.

The introduction of Schnorr through Taproot may mark the beginning of a new generation of signatures for Bitcoin and other blockchains.

For clarity, one of the major advantages of Schnorr signatures is the ability to tweak signatures. Leveraging cryptographic tricks such as Merkle trees, users will be able to embed multiple keys inside a complex Bitcoin transaction while producing a single output or address. Put differently, the signatures of multiple users involved in a transaction can be aggregated into one single Schnorr signature (aka signature aggregation).

What Taproot means for Bitcoin?

As early said, the Taproot upgrade will introduce several major improvements to Bitcoin’s privacy and scalability. Other added benefits include lower transaction fees, a reduced amount of data to be stored on the blockchain, and more wallet functionality.

What’s next?

With the activation locked in, the next phase of activation is a five-month waiting period. Node operators and miners will have the next few months to update their software to the newest version of Bitcoin Core, Bitcoin Core 0.21.1, which contains activation logic for the upgrade.

When Bitcoin finally reaches the specified “block height” 709,632 in November, Taproot will be activated. All the relevant proposals associated with the upgrade will automatically kick in. Upon activation, all upgraded nodes will be able to accept transactions made using the upgrade protocol.