What is taproot?
Taproot is a soft fork that helps upgrade the Bitcoin network, namely scripts. It was released on 14/11/2021 with the aim of increasing the security of Bitcoin and supporting the resolution of complex issues surrounding transactions (including the release of Time Lock, Multi-signature requirements…).
In fact, Taproot can hide the fact that there is a Bitcoin script already running.
For example, when using Bitcoin with Taproot, no one can distinguish between a Peer-to-Peer transaction and a complex Smart contract traded on the Lightning network channel. All transactions are displayed as peer-to-peer transactions. However, this cannot help the initial sender’s wallet and the final recipient to be exposed.
The history of taproot
Since Bitcoin’s launch, it has gone through ups and downs. It can be considered that Bitcoin has contributed greatly to the popularity of all cryptocurrencies and received attention and adoption from financial investors. Due to incident, especially attack on the Japanese exchange Mt. Gox, the cryptocurrency community has always supported Bitcoin.
However, one of the most important issues is privacy. The reason is that Bitcoin serves as a public blockchain, which can be monitored for transactions in this network.
Each investor can remain anonymous using techniques such as coin mixing, CoinJoins, but none of them support Bitcoin to become a separate currency. That’s why Taproot was launched.
The issue of upgrading Taproot has been considered as an important step to solve many problems, notably privacy. Its purpose is to change the operation of Bitcoin scripts. This is further enhanced when the developers combine a Taproot upgrade and a related upgrade (called Schnorr signature).
In fact, the Taproot proposal was first developed by Greg Maxwell, developer of Bitcoin Core, which was announced in January 2018. It wasn’t until October 2020 that it was merged into the Bitcoin Core library. Developers must adopt the new consensus rule in order that this version to be fully developed. Therefore, the activation can last up to several months, depending on how it takes place.
How taproot works
To complete a Taproot upgrade, there are 3 BIPs that work together, influence and complement each other depending on different ways.
Schnorr Signature (BIP304)
Schnorr Signature consists of a cryptographic signature scheme which is developed by German mathematician and cryptographer – Claus Schnorr. It is essential for faster and more secure transaction validation on the network. After years of protecting algorithm by registering the copyright, in 2008, the copyright officially expired and this cryptographic algorithm was widely used.
The outstanding benefit of Schnorr Signature is the simplicity and effectiveness of creating short signatures. It can get multiple internal keys of a complex Bitcoin transaction, then create a single signature. That means signatures from multiple parties involved in the transaction can be aggregated into a single signature.
This is the basis of the current Taproot update version. It was built on the Segwit (2017) upgrade, using the Merkelized Alternative Script Tree (MAST) with the aim of scaling bitcoin transaction data on the blockchain.
Bitcoin transactions are protected by public and private keys. To use the funds in the wallet, investors need to provide a signature. This helps prove they are the real owners before making the transaction.
As mentioned above, investors can issue a Time Lock or Multi-signature to make Bitcoin transactions complicated. However, those transactions require a lot of inputs and complex signatures to verify. Therefore, transactions are slowed down and transaction information is disclosed. As a result, sensitive investor data can be collected by the address owner.
The number of orders and files can be reduced thanks to the MAST trading mechanism that can represent multiple scripts. A complex Bitcoin transaction does not need a Merkle Tree to process. Instead, MAST allows conditions for making transactions to be committed to the Blockchain and significantly reduces the volume of data that must be stored on the network. It can be said that this function not only provides greater scalability and higher efficiency for blockchain but also brings greater privacy to investors.
This is a coding language upgrade for Bitcoin Script to support operations for the remaining 2 BIPs. It is a collection of opcodes and trading guides. Tapscript is expected to bring flexibility to new features and support the creation of smart contracts in the future.
Benefits of Taproot
As mentioned above, Taproot brings many major improvements to the privacy of the Bitcoin Blockchain. It helps to speed up the efficiency when making transactions. Besides, it also has many other benefits, the most prominent can be mentioned as:
- Reduce the volume of data that blockchain transmits and stores.
- Supports making multiple transactions on one block
- Save on transaction costs.
- Reduce the malleability of signatures. This is a common security risk on the Bitcoin network, causing the transaction to have its signature replaced before it is confirmed.
The importance of the Taproot upgrade
This is expected by investors to be a method to enhance the functionality of the Bitcoin network with fast and secure transactions. After upgrading Taproot, Bitcoin will be able to continue to expand the market, deploy smart contracts, and accelerate the development of NFT and DeFi in the future.
Taproof is a technology upgrade that offers the ultimate solution to improve Bitcoin. As efficiency is enhanced, costs are reduced, and privacy is guaranteed, more transactions will be made on the Bitcoin blockchain. It is an important factor that helps BTC compete with other coins in the market.
Related: Bitcoin continues to become green again after decline