Bitcoin, the world’s most valuable cryptocurrency, has now received its biggest upgrade since 2017, called Taproot. This upgrade will introduce what’s called Schnorr signatures—which will help Bitcoin transactions become more private, efficient and cost efficient.
Interestingly, Taproot is the biggest upgrade in Bitcoin’s network after the Segregated Witness (SegWit), upgrade in July 2017 that addressed scalability issues. Taproot promises to improve many things for the network including privacy features and smart contract functions. These changes will lead to improved wallet functionality and reduced fees for complex transactions.
“Taproot is an upgrade that will improve Bitcoin’s capacity for scripting, bringing it in line with competing blockchains like Ethereum that already have programmable smart contracts,” said Cryptobriefing, a crypto research company in a report.
Better smart contracts
Smart contracts are programs stored on a blockchain that run when predetermined conditions are met. To put it simply, they are essential in powering decentralised finance applications and nonfungible tokens (NFTs).
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The Bitcoin network uses smart contracts right now too, but they’re virtually useless on the platform—as it is costlier, time-consuming, and limits the number of transactions on the Blockchain network. However, with Taproot coming into the picture, multiple transactions could be done to a Bitcoin wallet, which can be hashed under one transaction and can be useful for streamlining various applications, such as enabling transactions to happen from multiple parties to one wallet. This will likely lead to an increase in day-to-day applications for Bitcoin.
It is worth noting that at the moment, the Bitcoin network can handle about four to five transactions per second, and transaction fees can swell to $75 or more. As of now, we don’t know how much cheaper transactions will be after Taproot, but the upgrade promises to make the transaction fee cheaper.
Schnorr signatures used by Taproot upgrade will also reduce the amount of data needed for multi-signature transactions, which are more complicated to process than standard ones. And with lesser data involved, transactions will become more time-efficient, thereby making the transactions cost-efficient.
As more crypto adoption happens worldwide, the need for privacy has grown. Blockchain-based systems need to make it more difficult to track transactions based on public wallet addresses. The Taproot upgrade aims to increase privacy for certain transactions.
“Taproot will also introduce MAST (Merkelized Abstract Syntax Tree), which will make it more difficult to trace and analyze Bitcoin transactions,” the Cryptobrief report added. As a result of the upgrade, multi-signature transactions will now be indistinguishable from simple transactions, meaning greater anonymity and privacy for users.
Meanwhile, the Bitcoin price today is $65,839.47 with a 24-hour trading volume of $26,667,305,809. Bitcoin is up by 2.31 percent in the last 24 hours, as per a report by CoinMarket cap.
Disclaimer: Cryptocurrency is an unregulated space and digital currencies are not backed by any sovereign authority. Investing in cryptocurrency comes with market risks. This article does not claim to provide any kind of financial advice for trading or buying cryptocurrency.
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