The largest Bitcoin update in four years, Taproot, has been activated. It brings more privacy and efficiency to transactions. In addition, Taproot will unlock the potential for smart contracts that can be used to eliminate intermediaries from transactions.
The first Bitcoin update in four years has just begun. This is a rare moment of consensus between stakeholders and a big deal for digital gold, reported CNBC. Unlike the 2017 Bitcoin update, Taproot enjoys near-universal support, in part because the changes involve fairly incremental code improvements.
“Taproot matters, because it opens a breadth of opportunity for entrepreneurs interested in expanding bitcoin’s utility,” said Alyse Killeen, founder and managing partner of Bitcoin-focused venture firm Stillmark.
Most of the Bitcoin conversion involves digital signatures. At the moment, the cryptocurrency uses the so-called “Elliptic Curve Digital Signature Algorithm,” which creates a signature from the private key that controls the Bitcoin wallet and ensures that Bitcoin can only be spent by the rightful owner. Taproot will add something known as Schnorr signatures, which essentially makes multi-signature transactions unreadable. This will make simple transactions indistinguishable from more complex and multi-signature transactions. In practice, this means more confidentiality.
These souped-up signatures are also a game-changer for smart contracts, which are self-executing agreements that live on the blockchain. Taproot makes smart contracts cheaper and smaller in terms of their blockchain space. Currently, smart contracts can be created both at the Bitcoin core protocol level and on the Lightning Network.
“The most important thing for Taproot is...smart contracts,” said Fred Thiel, CEO of cryptocurrency mining specialist Marathon Digital Holdings. “It’s already the primary driver of innovation on the Ethereum network. Smart contracts essentially give you the opportunity to really build applications and businesses on the blockchain.” Thus, Bitcoin can become a more important player in the DeFi world.
The Bitcoin community agreed to block the update in June until it was well tested, making it less likely that something would go wrong during the update. Thus, the deployment takes place in November.
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Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.