The biggest upgrade in bitcoin’s network in four years is slated to happen over the weekend. Here’s what you need to know.
Taproot is the first change to bitcoin’s protocol since SegWit, the last upgrade which took place in July 2017.
Unlike the highly controversial SegWit, which caused a “civil war” in the bitcoin community, Taproot has received a near-universal consensus, Ninos Mansor, partner at Arrington XRP Capital Partner, a crypto investment firm, told Insider.
The upgrade is aimed primarily at making the cryptocurrency’s network more private, secure, and scalable, encompassed by three separate Bitcoin Improvement Proposals or BIPs. These are:
- BIP340 – replaces Elliptic Curve Digital Signature Algorithm with Schnorr Signatures, a cryptographic scheme that makes complex bitcoin transactions simpler and more secure.
- BIP341 – builds on the SegWit upgrade and improves bitcoin privacy while lowering transaction fees. It also introduces MAST, which allows users to lock outputs to multiple scripts.
- BIP342 – reforms Bitcoin’s scripting language and introduces “Tapscript,” which changes how signatures are evaluated. It also takes advantage of Schnorr signatures.
The upgrade is also aimed at equipping the world’s largest digital asset by market cap to be able to compete more with assets like ethereum, which is known for its programmable smart contracts.
Mansor elaborates on these proposals in the 29-page report published last month. But more than the technicalities of the upgrades, it is the act of upgrading the network that is just as important, he said.
“The upgrade could be a macro turning point for evolvability and innovation, merging the best of post-Segwit conservatism with the energy of new beginnings,” Mansor wrote in the report. “It is a meta-upgrade, a chance to redefine what it means to contribute to bitcoin, whether one is a miner, developer, or full node.”
And even if Taproot will only introduce marginal changes, Mansor told Insider the upgrade is crucial as it sets the protocol up for future ones. This, he said, will also debunk theories that bitcoin is “stagnant.”
But how will the upgrade affect retail traders? For starters, bitcoin transactions will be more affordable, more secure, and more private, Mansor said. Keys, for instance, will not be as exposed on the chain because multisig outputs, single sig outputs, and other complex smart contracts will all look the same. “People will be even more confident in the network,” he added.
Taproot was approved by miners around the world in June 2021 after being initially proposed by core developer Gregory Maxwell in January 2018. The long lead time between the proposal and the activation has to do with the numerous rounds of reviewing and testing.
Simply put, Taproot is set to make bitcoin’s network better and more robust, Mansor said. “It makes complicated transactions easier to achieve while improving privacy and scalability.”