So apparently the Bitcoin network (miners) are signaling with overwhelming support that they are going to allow the "Taproot" update to go into effect in November. This is one of the biggest developments Bitcoin has allowed in quite some time. Normally the network is founded in conservatism and rarely changes. This is considered my many a feature instead of a bug. Stability is important.
What Is Taproot and How It Will Benefit Bitcoin
I've actually been hearing about this potential upgrade for a while, but I haven't really looked into it until now. If I'm being honest I guess I just assumed it wasn't going to happen considering Bitcoin's extremely conservative history.
Taproot is a soft fork that improves Bitcoin’s scripts to increase privacy and improve upon other factors related to complex transactions. Transactions on the Bitcoin network can use various features that make them more complex, including timelock releases, multi-signature requirements, and others.
Without Taproot, anyone can detect transactions that use those complex functionalities, which require the creation of multiple transactions. However, the Taproot upgrade will make it possible to "cloak" all the moving parts of a Bitcoin transaction that includes these features. So even if the transactions adopt those features, they will look like a single transaction. This is a big win for Bitcoin privacy advocates.
How is this accomplished?
Apparently with "Schnorr signatures".
Schnorr signatures consist of a cryptographic signature scheme developed by Claus Schnorr – a German mathematician and cryptographer. Even though Schnorr had his algorithm protected under a patent for many years, the patent officially expired in 2008. Among a number of benefits, Schnorr signatures are primarily known for their simplicity and efficiency in generating short signatures.
This part I find quite funny because people seem to care about using tech that has a patent. Honestly, that's the entire point of this open-source revolution. Intellectual property laws are now impossible to enforce. In the event that Bitcoin did adopt patented code no one would be able to stop them. Especially in the case of soft-forks like this one where using the code becomes optional and backwards compatible.
One of the main advantages of Schnorr signatures is that they’re able to take multiple keys inside a complex Bitcoin transaction and produce a single unique signature. This means that the signatures from the multiple parties involved in the transaction can be “aggregated” into a single Schnorr signature. This is known as signature aggregation.
This might not sound like a big deal, but it actually might be huge. If you've ever looked at a block explorer when transferring money to/from an exchange, you've seen that hundreds of transactions often get lumped into the same operation all contained on the same block. By the sound of this tech, using Schnorr signatures, corporations/exchanges could reduce the amount data they need to store on the blockchain by MAGNITUDES. Meaning hundreds of operations could be consolidated into a single transfer, and that transfer would have the added benefit of being more private due to all being lumped into the same hash or whatnot.
I actually suddenly remember reading about this a while back. Using this tech, privacy is increased and while cost is decreased. This is usually unheard of in the world of crypto where developers must chooses between a wide array of attributes, checks, and balances. Normally if one wanted to increase privacy they would lose scalability and speed, but with Taproot, Bitcoin is actually going to gain both at the same time, which is pretty insane when you think about it. Good stuff.
And that value not only trickles down to every Bitcoin user in the form of increased privacy/security and lower fees, but it also trickles into every other project. A win for Bitcoin is a win for everyone. This is the nature of collaborative open-source tech.
How will Taproot benefit Bitcoin?
- Reduced amount of data to be transferred and stored on the blockchain.
- More transactions per block (higher TPS rate).
- Lower transaction fees.
- More privacy.
Another benefit to Taproot is the fact that signatures will no longer be malleable, which is a known security risk in the Bitcoin network. Simply put, signature malleability means that it’s technically possible to alter the signature of a transaction before it gets confirmed. By doing this, the attack would make it appear as if the transaction never happened.
Conclusion
Let's be honest, privacy isn't a top concern for mainstream users. We've been bred from birth with the "I have nothing to hide attitude". We are already trained to allow corporations to monetize our digital souls.
The big advantage of Taproot is that it allows huge batches of transactions/multisig to be consolidated into a single transaction. It's going to save a lot of room and reduce fees. That's the major selling point here for the vast majority of users. Either way, it's seemingly a win/win for everyone involved. That's what collaborative tech is all about. Exciting times.