One of the significant issues that cryptocurrencies face today is that they still battle with privacy, security and scalability. Developers are constantly trying to address these issues, but this takes a lot of time. While the lightning network is already in use, users are looking forward to some reliable privacy solution which is one of the main issues of cryptocurrencies like bitcoin, where every transaction can be tracked and monitored by anyone.
How does Bitcoin Taproot Upgrade work?
To solve the issue of privacy, the developers are about to bring a new layer of anonymity called “Taproot upgrade”. This is a soft root network upgrade for bitcoin that improves privacy through the use Schnorr Signature Algorithm (SSA) instead of the current Elliptic Curve Digital Signature Algorithm (ECDSA).
The upgrade allows to combine multiple transactions into a single one which is more accessible, cheaper and more efficient. This means all the transactions will appear as a single transaction, and its actual form won’t be revealed to other participants. Taproot also helps with scalability by freeing up the transaction space by 20% and reducing the transaction fee. This will lead to more transactions happening on the network.
When will the taproot upgrade come into action?
The Taproot proposal was unveiled by developer Greg Maxwell for the first time in January 2018. After two years, this upgrade was added to the bitcoin library. As of now, miners can finally vote on this upgrade and is expected to be implemented around the end of this year.
Though the upgrade is not controversial, it will not roll out before November because a lot of testing is needed ahead of time to make sure there is nothing wrong with the upgrade.
Why is a taproot upgrade needed?
Taproot’s upgrade mainly relies on the Schnorr Signature Algorithm, a cryptographic signature scheme created by German cryptographer Klaus Schnorr in the 1980s. The creator of bitcoin, Satoshi Nakamoto had the chance to use schnorr signatures. But he opted for the ECDSA signature algorithm instead. He might have made this decision because ECDSA was more secure and widely used at that time. But now the upgrade is needed because;
- ECDSA lack the characteristics needed to create complex transactions that are fast, efficient and anonymous.
- While the Schnorr signatures can use multiple signatures inside a complex bitcoin transaction to create a signal signature.
Aggregation of numerous signatures in a single schnorr signature does not reveal its inner content, thus providing a high level of privacy.
The most significant makeover in four years
Bitcoin’s most extensive upgrade in four years, the taproot, is highly anticipated by a set of features that will revolutionize the world’s most popular digital currencies’ privacy capabilities. On the other hand, users will also see improvements on the front of scalability as transaction aggregation will help to decongest the network.
Taproot upgrade will take Bitcoin to another level and is expected to unlock the potential of multi-signature transactions and smart contracts. According to experts, lower transaction fees and upgraded privacy will open a sea of opportunities for entrepreneurs interested in expanding their BTC ventures.