The Value of Taproot Needs to be Known, the Privacy and Security of BTC will be Strengthened after November!
On June 9th this year, El Salvador, a South American country, passed the “Bitcoin Act” and became the first country in the world to use Bitcoin as legal tender. Since then, many problems that have always existed in Bitcoin have once again been highlighted. The limited numbers of transactions, slow transaction speeds, unsuitability for micropayments, and privacy leaks have all been stumbling blocks to the rapid development of Bitcoin. Therefore, Bitcoin Core developer Gregory Maxwell proposed the Taproot upgrade to solve this series of problems. Taproot is a protocol upgrade designed to improve Bitcoin’s privacy and flexibility.
November 15, 2021
The main content of the upgrade:
With technical improvements, the original elliptic curve digital signature algorithm (ECDSA) used in cryptography is replaced by Schnorr signature (Schnorr) and Merklized instead of script trees.
In a nutshell, the upgrade purpose is mainly reflected in these aspects: improving the scalability and security of the Bitcoin network, strengthening the privacy of transactions, reducing the amount of data in complex transactions, reducing transaction fees, and increasing Bitcoin’s flexibility.
Upgraded technical improvements:
The back-end code update will increase the scalability, privacy, transparency and substitutability of the Bitcoin network; technical improvements, 1. Change the original elliptic curve digital signature algorithm (ECDSA) to Schnorr signature (Schnorr) to reduce and improve the size of transactions on the chain, verify transactions faster, and improve the privacy of complex transactions. 2. Merklized replaces the script tree, and special currency transactions will pass through the MAST script. These scripts have functions similar to Schnorr signatures, which means that they can restrict the transmission of data on the chain. The MAST script compresses the event conditions into the simplest form, called the Merkle root. Complex Bitcoin transactions (such as transactions that occur in Bitcoin DeFi applications) are compressed into a single hash through MAST, thereby minimizing memory usage and improving scalability. In short, MAST will allow Bitcoin developers to write more complex scripts with less gas costs.
The most important thing to understand in the Taproot upgrade is that through Schnorr signatures and MAST scripts, all layers of Bitcoin will become more efficient, private and practical, while at the same time increasing the utilization rate and price of Bitcoin!
Greater value after upgrade:
- Bitcoin network applications are increased, restrictions are reduced and Bitcoin’s development becomes unlimited.
- The Lightning Network (consisting of nodes that transfer Bitcoin transactions efficiently and quickly through payment channels) may be the biggest beneficiary after the Taproot upgrade, improving the scalability and privacy of the Bitcoin Lightning Network, and its users. The Lightning Network will become more intuitive and cost-effective.
- Based on the Schnorr signature and MAST script used after the upgrade, the security, efficiency and practicality of the Bitcoin network will most likely give birth to decentralized financial applications. DeFi applications are very advantageous to build on the Bitcoin network. Firstly, they require the least code and secondly, Bitcoin is the most decentralized network available. These factors make it possible for Bitcoin DeFi applications to be more censorship resistant than Ethereum applications! Looking at the future, the application of Bitcoin may grow synchrounously with the development of its layer 2 network, and this will only happen after the Taproot upgrade.
- This upgrade will also help strengthen Bitcoin’s dominant position in the cryptocurrency market.
Before Taproot, Bitcoin only had transaction and storage functions, and its value was more embodied in encrypted storage methods and was evaluated in terms of being ‘digital gold’. The Bitcoin community reduced the block size to improve Bitcoin’s scalability through SegWit (Segregated Witness in 2017); and will be improving transaction congestion through the second-tier expansion plan of the Lightning Network; and optimizing signature methods through Taproot. After improvements in reducing the space occupied by transaction data, Bitcoin may become a digital asset with a high transaction volume. The increase in flexibility at the network level also allows Bitcoin to better integrate into the next stage of the development of the Internet. Web3.0 or the Internet world of Metaverse requires features such as low latency, high participation, and high privacy. Therefore, from a macro point of view, one should not really underestimate the Taproot protocol upgrade.
Recently, the US Securities and Exchange Commission (SEC) approved the Bitcoin futures ETF issued by the fund management company ProShares. With positive stimulation of the Bitcoin ETF, the price of Bitcoin once again broke a record high. The Taproot upgrade will be ushering in with similar enthusiasm. 2021 will be an inestimable year in the history of the Bitcoin network development, and it may also move the entire cryptocurrency market towards a brighter future.
The much-anticipated month of November is coming soon. Let’s be the lucky ones to witness the changes brought about by the BTC Taproot upgrade!