Bitcoin is scheduled to fully upgrade to include the Taproot update by November 2021. Taproot is the biggest update since the SegWit update that occurred in 2017. It has officially been confirmed since 90% of miners have signaled that they approve the amendments to the Bitcoin Core functionality code. Taproot will address many concerns that will keep Bitcoin competitive for years to come.
The biggest upgrade are multisig transactions. This will include the ability to require multiple private keys to complete a transaction, thereby multiplying the difficulty of faking transactions. It enhances the security of the transaction by adding an requiring multiple private keys in order to signal a transaction. This makes it exponentially more difficult to fake transactions or to accidentally spend Bitcoin.
Schorr signatures increases security by utilizing multiple signatures to create and verify a transaction. To get into specifics, this article on Medium will help. This also increases the anonymity of a transaction by making complex transactions appear to be simple A to B transactions.
Better Anonymity Features
Although Bitcoin, like most blockchain technologies, has a level of anonymity; we commonly refer to it as psudeo-anonymoity. Transactions are between addresses can be publicly verified on the blockchain, but in many cases do not reference who owns what private keys, and who has access to spend which funds. Taproot allows transactions to be appear as one thing, but are actually masking transactions between multiple wallets. Only experts will be able to utilize this technology, after the upgrade is integrated. In many cases, retail investors could care less, but it allows for a better integration of the Bitcoin White Paper manifesto ideas of Satoshi.
Scalability for Bitcoin has been an issue since the start. Working with the original Bitcoin code has encouraged developers to create novel approaches to increase transactions per second and reduce data taken up on the blockchain to reduce bloat. This has been accomplished with SegWit and the Lightning Network. As June 12, 2021, the entire Bitcoin blockchain is 337 Gigabytes. With increased popularity comes higher transaction volume, and with that becomes bloat. Taproot strives to increase the scalability of Bitcoin in a variety of ways:
- Reduced amount of data to be transferred and stored on the blockchain.
- More transactions per block
- Lower transaction fees.
Additional Scripting Functionality
One of the primary reasons that Ethereum has increased in value is due to the ability to execute smart contracts on-chain. Smart contracts are essential programs, or scripts, that allow transactions to occur when certain criteria are met. Bitcoin has the capabilities to do this, but in a much less efficient way. Taproot solves this issue by creating a reference to the script on one transaction as opposed to the current method of including the script in each transaction. This will reduce the size of transactions locked into the blockchain. Thus it will create a higher transactional output, while decreasing the size of transactions associated to scripts.Taproot will help secure Bitcoin’s dominance for years to come and return to the original intent of Satoshi’s whitepaper. It will accomplish this primarily increasing security for institutional investors. Many cryptocurrency skeptics argue that Bitcoin isn’t secure, and Taproot should help dispel any of these claims. Taproot will not dispel all threats to Bitcoin’s integrity. AI and quantum computing are distant threats, but are unlikely to make significant threats for the foreseeable future. Due to the hard forks of the past, the Bitcoin developer community has risen stronger and become more unified than ever. With the resources they have, we expect Bitcoin’s dominance to be maintained.