Bitcoin is the first and largest cryptocurrency, but the coin has long been plagued by scalability issues. Its blockchain transaction record is public to provide transparency and accountability, but as consumer focus shifts to privacy, Bitcoin has needed to strike a better balance between the transparency of the network and the privacy of its users.
The Taproot upgrade seeks to begin to address both the scalability and privacy problems on the network. It serves as a stepping stone that could lead to major network improvements in the future.
What exactly is the Bitcoin Taproot upgrade? Learn more now.
Is The Bitcoin Taproot Upgrade Live?
Bitcoin works on a Proof-of-Work (PoW) model, in which miners solve complex cryptographic puzzles in order to mine new blocks and validate network transactions. When block #709632 was mined on November 14, 2021, the network adopted the new upgrade.
The upgrade was first proposed in 2018, with several Bitcoin Improvement Proposals (BIPs) being created and merged into Bitcoin Core. Bitcoin Core is the source code that runs the Bitcoin network.
In June 2021, over 90% of miners signalled their support for the upgrade. The several month gap between the proposal being ratified and the implementation existed so that miners could update their software to be compatible with the new upgrade. Additionally, this time allowed for added testing of the upgrade to ensure that it was bug-free.
So far, not all miners have updated their software, and those miners are no longer able to mine new blocks until they complete the upgrade. Even without all miners having updated to Taproot, the network is currently running properly.
What Does The Taproot Upgrade Do?
Taproot enables the batching of transactions and signatures together. Bitcoin requires a signature to verify a transaction. This signature comes in the form of a private key from a party involved in the transaction.
This private key is then verified against a public key. These signatures were an extreme burden on the network during multi-signature transactions in which multiple users are involved in a transaction.
Taproot introduces Schnorr signatures, which are smaller and more efficient than their predecessors. For multiple signature transactions, these signatures make a huge difference in how efficiently the blockchain can process these transactions.
Additionally, Schnorr signatures allow for the grouping of signatures in multiple-signature transactions, which makes them look less distinct from single-signature transactions. This increases the privacy of all parties involved in large multiple-signature transactions.
Are There Smart Contracts on Taproot?
In short, no. Bitcoin does not yet have smart contract functionality.
Smart contracts are agreements made on the blockchain that automatically complete when certain conditions occur. They represent a very powerful new decentralised tool that can enable complex decentralized applications (dapps) such as popular decentralized finance tools like Aave, Uniswap and Serum. (DeFi). Ethereum is the current leader with its robust dApp ecosystem.
Taproot is a step towards a Bitcoin network that can run smart contracts. Large groups of transactions are needed to run dApps, and by reducing the space taken up by multiple-signature transactions, Taproot brings Bitcoin closer to developing that functionality.
What Does Taproot Mean For Bitcoin’s Price?
Taproot itself doesn’t revolutionize the network, but it marks an important stepping stone towards future improvements. While Taproot isn’t a hugely important improvement to Bitcoin, it is still universally regarded as a good thing for the network. Taproot can only help increase Bitcoin’s utility, and as a result, its price.
Where To Buy Bitcoin
Centralized exchanges are the most user-friendly way to buy Bitcoin. eToro offers a program in which investors can mimic the trades of notable investors and celebrities. Coinbase stands out for its fantastic learn-and-earn program that offers steady rewards in the form of various cryptocurrencies. These exchanges just require an email, password and some basic personal information.
To help decide which exchange is best for you, check out Benzinga’s guide to the best crypto trading platforms.
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Cryptocurrency Market Update
The cryptocurrency market currently sits in a dip due to fears that a new COVID-19 variant could cause more restrictions. However, in 2020 the market quickly recovered from the dip caused by COVID-19, and this time we have vaccines and therapeutics that should lessen the potential impact of the new virus strain. Sentiment remains bullish.
Is Using Bitcoin Different After The Upgrade?
Using Bitcoin is marginally different after the Taproot upgrade. While some benefits exist, overall the state of the network is mostly unchanged.
Taproot does put Bitcoin onto better footing to compete with other blockchains, but it will take more than just Taproot to unlock smart contract functionality.
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