Bitcoin biggest upgrade in five years rolls out democratically: Cryptocurrency Taproot Code introduces Schnorr signatures that increases efficiency, lowers fees, etc.

Bitcoin Cryptocurrency Taproot Upgrade Update Smart Contracts DeFi
Biggest-ever update in the last five years. Pic credit: BTC Keychain/Flickr

The Bitcoin cryptocurrency blockchain network has undergone a massive upgrade process. In fact, it is the biggest update since 2017. Activated yesterday, the Taproot Code promises multifold improvements to privacy, scalability, and security on the Bitcoin Blockchain network.

More than 90 percent of Bitcoin miners, trading platforms, and users, jointly chose to “signal” their support to the biggest backend upgrade for the Bitcoin cryptocurrency. The upgrade promises to bring greater transactional privacy and efficiency while also unlocking more potential for smart, and hence cheaper, contracts.

Decentralized Finance (Defi) gets one of its biggest-ever upgrades that dissolves inherent limitations within Bitcoin:

Bitcoin is the first, true cryptocurrency. It is by far the oldest. However, the digital coin has had several limitations, some of which the original creators intentionally left behind. The latest update addresses some of these limitations, which were preventing Bitcoin from fulfilling its true potential.

The Taproot update is the first major upgrade to the network’s code since Segregated Witness or SegWit, which happened in 2017. Taproot isn’t a single upgrade, but instead, it is a coming together of a number of technical improvements over the years.

One of the major aspects of the Taproot update is the Schnorr signatures. This will open up the door to far more complex, yet transparent, transactions on the Bitcoin network. Taproot uses the Schnorr scheme which is faster and smaller than previously used ECDSA (Elliptic Curve Digital Signature Algorithm).

The biggest advantage of the new update is enhanced privacy and security. Moving ahead, transactions from multi-signature wallets would look like any other transaction.

In other words, simple, and complex multi-signature transactions, will now look the same on the blockchain. Moving ahead, cryptocurrency keys and Bitcoin addresses could remain obfuscated on the blockchain.

Taproot upgrade to Bitcoin will also make smart contracts smaller and cheaper:

One of the biggest complaints about cryptocurrencies in general, and Bitcoin in particular, is the size of the Blockchain, and the space it requires. The size of the Blockchain for Bitcoin was a serious consideration that was limiting the cryptocurrency’s adoption by smaller businesses.

Ethereum, another popular cryptocurrency, does not have these limitations. Hence, it is a far nimbler and comparatively, more efficient digital token. In fact, Ethereum’s “smart contracts” are somewhat of a “gold standard”, and Bitcoin has these now as well.

Moving ahead, the Bitcoin backend will be able to create self-executing agreements on the coin’s core protocol layer and on the Lightning Network (a payment platform). Transactions on the latter are faster, and relatively cheaper, to execute or process.

Simply put, self-executing contracts could eliminate middlemen, and allow a lot of smarter contracts. This, in turn, could help small and medium businesses to adopt Bitcoin as a tradeable digital currency in everyday transactions.

The Bitcoin Core 21.1 is still available or supported only on a little more than half of the known Bitcoin nodes. Hence it should take a few more months before the Taproot upgrade is commonplace. On the front end though, Bitcoin buyers, traders, and investors should not feel any noticeable difference during their transactions.

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