Taproot has finally been implemented even though it has been in talks for years. The Bitcoin upgrade will bring a higher level of transaction privacy, leading to smart contracts. So what does this mean for BTC? Well, Taproot will do away with the need for intermediaries in transactions, a move that will bring greater efficiency and drive down costs.
The last major Bitcoin upgrade focused on separating transaction signatures to increase the block size limit on a blockchain, implemented four years ago. SegWit, or Segregated Witness, freed up space to add more transactions to the blockchain. But Taproot has been in the conversation since 2012 when Bitcoin Core developer Mike Hearn came up with the idea to reduce computational expense by adding new cryptography to the batch verification of signatures.
That process would require the use of the Schnorr signatures algorithm, an algorithm created by Claus Schnorr. He also held the patent until it expired in 2008. So, to bring you forward, it’s now 2021, and the latest Bitcoin upgrade known as Taproot is here. Unfortunately, the signature method used until now caused a little bit of division in the Bitcoin family. Still, Taproot has nearly universal support, which will be a positive aspect of Bitcoin’s growth.
The first benefit is the storage of fewer data. The Schnorr signatures have a maximum size of 64 bytes compared to the elliptic curve digital signature algorithm (ECDSA), which comes in at 72 bytes for just one digital signature in each transaction. Thus, when there are nearly half a million transactions a day, Schnorr signatures save a great deal of space.
Another benefit is the efficiency of verifying each transaction. When each signature has to be validated one by one, this process can consume a lot of CPU power. But Schnorr signatures can be batched together and solved at once, leading to substantial computational savings.
There are plenty of benefits that Taproot brings to the table, and Bitcoin investors are glad it’s finally here. Transactional costs are being driven down while efficiency and speed are increasing. So what could be the downside of such a Bitcoin upgrade?
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