What is Bitcoin’s Taproot Upgrade? Everything you need to know!
Recently Bitcoin went through one of the most major upgrades on its network in the past 4 years. Remember the last time Bitcoin protocol was upgraded? Not to the satisfaction of many, it led to the creation of a new cryptocurrency Bitcoin Cash. So let us dig deeper into the current taproot upgrade and understand why it is a game-changer for cryptocurrency.
So what is Taproot upgrade and what does it do?
In the blockchain world, every cryptocurrency encounters 3 unique issues privacy, security, and scalability. This recent upgrade facilitates Bitcoin to be more scalable, secure and, anonymous.
This taproot upgrade was first proposed by Greg Maxwell in 2018 and has been at work since then and finally activated on November 14, 2021. The three Bitcoin Improvement Protocols (BIPs) were codified into the Taproot upgrade and is written by Tim Ruffing, Pieter Wuille, Jonas Nick, and A.J. Townes.
The Taproot upgrade makes batches multiple signatures and transactions together feasible, making it faster to verify transactions on Bitcoin's network. Digital signatures are required on Bitcoin's network to verify transactions. They are generated using private keys and are validated against public keys. Now, what are public and private keys? In any bitcoin transaction, the wallet forms an essential part. And a wallet consists of a unique cryptographic key pair - a public key and a private key. A public key acts like an account address, using which one can send and receive bitcoins, and the private key acts as a transaction authenticator like one-time passwords (OTPs).
Before Taproot upgrade:
Before Taproot's upgrade, verification of transactions on Bitcoin's network was very slow because each and every digital signature was validated against a public key. This method extended the amount of time that was required for complex multi-sig transactions that require multiple inputs and signatures.
After Taproot upgrade:
The Taproot upgrade enables signature aggregation, which means that multiple signatures can be batched together and validated. The benefit for multi-sig transactions is even more prominent since the upgrade combines transactions containing many inputs, such as those from multiple addresses on Bitcoin's network, into a single one. This upgrade also combines single-sig and multi-sig transactions into a single verification process which also improves privacy and security as it is difficult to differentiate between single-sig and multi-sig transactions.
The reduced requirement of block space for each transaction increases transaction output which in turn leads to reduced transaction costs.
Furthermore, the Taproot upgrade also sets the foundation for future innovations. The Tapscript included in the Taproot upgrade has made it easier for developers to implement future updates into the blockchain.