What is the Bitcoin Taproot Upgrade?

In the plant world, a taproot is a large, central, and dominant root from which other roots sprout laterally. If this sounds like a particularly apt description for an extremely important upgrade to an even more important network, then you’ve hit the nail right on the head.

Taproot is the name for a fundamental upgrade to the Bitcoin network that came to fruition in 2021 following its proposal back in 2018. It’s the most critical upgrade carried out on the Bitcoin network in a long time and is significant for its practically unanimous acceptance, unlike previous upgrades.

So, what exactly is the Taproot upgrade, and what does it bring to Bitcoin and its vaunted payment network? Let’s get into the weeds!

How is Bitcoin Upgraded?

A network upgrade, to the layman, is quite an innocuous thing. Most of us are familiar with network upgrades in some shape or form, but they’re generally things that pass us by since most networks are controlled, maintained, and indeed upgraded by some sort of centralized entity.

Decentralized networks, on the other hand, are an entirely different story. A look at the political spectrum of any country paints a clear and quite universal picture—there are people to the left and right of the center who disagree on a lot of issues, and there are also voters on the extremes of the spectrum.

It’s a sad fact today that voters in certain developed countries can’t agree on the fact that children deserve the right to safety and education free from the Sword of Damocles, which is the unrestricted proliferation of firearms. Thus, it stands to reason that the millions of users of Bitcoin may not necessarily agree on what aspects of it need tweaking.

Historically, therefore, many upgrades to Bitcoin have resulted in the formation of camps and the taking of sides. This is particularly important since major blockchain upgrades are usually implemented via a process called a “hard fork.”

A hard fork, boiled down to its bare bones, means that the chain diverges at a certain point. One fork of the chain is the upgraded one, and the other is the non-upgraded version. The different camps of users, developers, and miners may decide to stick with one or the other forks of the chain.

Many major upgrades across blockchains like Bitcoin and Ethereum have been contentious, and hard forks have resulted in major cryptocurrencies in their own right, such as Bitcoin SV, Ethereum Classic, and more.

Why was Taproot Needed?

Bitcoin’s Taproot upgrade was implemented on November 14, 2021, with the goal of altering the way Bitcoin’s scripts operate to enhance privacy, security, and scalability.

Privacy, in fact, is one of the most contentious issues in both Bitcoin and all of cryptocurrency. Bitcoin is a public blockchain, which means that anyone can monitor the transactions taking place on the network, including the addresses of senders and receivers.

This is a far cry from the common criticism that crypto is for criminals and money launderers. If you need to engage in a little good old-fashioned money laundering or hide your money’s tracks, you’re better off using a bank like seasoned criminals and even terrorists do.

Back to Bitcoin, which “suffers” from more than just a lack of privacy. As far as blockchains go, it’s also fairly slow. Originally created to process around 7 transactions per second, Bitcoin has often suffered from high fees from users trying to push their transactions through ahead of others.

These shortcomings have prompted other upgrades throughout its lifespan, and the famous SegWit upgrade of 2017 targeted this lack of scalability.Despite these upgrades, Bitcoin lags far behind traditional payment networks as well as many other cryptocurrencies, setting the stage for Taproot.

How does Taproot Improve Bitcoin?

Taproot, widely considered to be the most important upgrade since SegWit, implements a new digital signature scheme called Schnorr signatures alongside two other Bitcoin Improvement Proposals (BIPs). Let’s take a detailed look at these three BIPs.

#1. BIP340—Schnorr Signatures

Satoshi Nakamoto, the pseudonymous person or entity behind the creation of Bitcoin, adopted a signature scheme called the Elliptic Curve Digital Signature Algorithm (ECDSA). ECDSA was a good fit for Bitcoin because it was open-source, secure, compact, and both widely used and very well understood by developers everywhere.

However, a German cryptographer and mathematician called Claus Schnorr invented an algorithm called the Schnorr Digital Signature Scheme (SDSS), whose patent expired in 2008. SDSS, or simply Schnorr signatures, have a few key benefits over ECDSA, especially in the area of efficiency.

What the adoption of Schnorr signatures accomplishes is that multiple keys within a complicated Bitcoin transaction can be taken, with the signatures of multiple parties involved being aggregated into a single Schnorr signature.

What this means is that multi-signature transactions and smart contract calls only need to commit the same amount of data as a standard single-signature transaction. This results in a far lighter blockchain load.

This also means that observers can’t tell whether a transaction includes single or multiple signatories. A Lightning Network transaction, a peer-to-peer transaction, or even a smart contract now all look the same, although the public addresses of the initial sender and final recipient remain public.

#2. BIP341—Taproot

The BIP that lends its name to the upgrade as a whole, Taproot is a follow-up that builds on the previous innovations provided by SegWit and also implements Merklized Alternative Script Trees (MAST).

MAST allows just the executed conditions of a smart contract transaction to be committed to the network rather than the entire details, including all other possible outcomes. Again, this provides a privacy benefit since the other conditions of the contract, which may include sensitive data, aren’t publicized.

Since only executed contract details are published, this also means that a lot fewer data needs to be sent to the blockchain, again improving blockchain load, efficiency, and scalability.

#3. BIP342—Tapscript

Tapscript enables the Schnorr signatures and Taproot upgrades detailed above by updating the Script coding language to accommodate them. It also makes future Bitcoin upgrades easier with the seamless introduction of new types of opcodes.

Why is the Bitcoin Taproot Upgrade Significant?

Taproot provides a major boost to the Bitcoin Network’s ability to cope with increased interest and usage and also enhances its reliability and privacy. While Bitcoin remains a public network, the Taproot upgrade obscures certain potentially sensitive details when multi-signature and smart contract transactions are carried out.

Given how beneficial Taproot is to Bitcoin, it received an unprecedented amount of support from the community at large. As mentioned previously, almost any upgrade to the network has the potential to be divisive, but Taproot enjoyed extremely wide-reaching support.

That said, it did have some high-profile detractors. Former US National Security Agency contractor Edward Snowden, who blew the whistle on various global surveillance programs, was critical of the upgrade and of the Bitcoin developers’ attitude toward privacy.

However, several Bitcoin developers who addressed the naturalized Russian’s comments countered with the fact that developers can’t decide the direction of the network by themselves and are beholden to the wishes of users.

According to some developers, Bitcoin’s users do not accept software upgrades that ruin Bitcoin’s auditability or backward-compatibility.

Despite limited pushback led by Snowden, Taproot was extremely well received by the majority of the Bitcoin community, unlike many of the other major upgrades in Bitcoin’s history, such as 2017’s SegWit.

What Happened With the SegWit Upgrade?

SegWit, or Segregated Witness (BIP141), was a Bitcoin upgrade that proposed to increase its capacity via a soft forked change in the transaction format of the network.

It mitigated the Bitcoin block size limitation by splitting a transaction into two segments, removing the “witness” signature from the original portion, and appending it separately at the end.

SegWit was a success, both in terms of its objective and for the Bitcoin price, which rose 50% the week after activation.

However, a group of activists, developers, and China-based miners were unhappy with the SegWit proposal and pushed an alternative agenda to solve scalability issues by increasing the block size from one to eight megabytes. The resulting hard fork is now known as Bitcoin Cash.

There was also a proposal called SegWit2x, known popularly as “the New York Agreement,” pushed by the Digital Currency Group, a firm consisting of CoinDesk, Genesis, Grayscale Investments, Foundry, and Luno. This effort ended in failure due to a lack of consensus, and the SegWit2x developers called it off a few days before the planned hard fork.

Who was Behind the Taproot Upgrade?

Taproot was proposed in 2018 by a Bitcoin Core developer named Gregory Maxwell. As a matter of fact, Maxwell was previously the CTO and a co-founder of Blockstream, a company that’s crucial to modern Bitcoin development, given its work on products such as the Liquid Network and Blockstream Satellite.

Was the Taproot Rollout Seamless?

Taproot went live by requiring proof of work miners to signal their support of the upgrade for a fortnight. This two-week period is significant because it marks the intervals between Bitcoin’s difficulty adjustments—a process that tweaks the difficulty of mining so that block time averages out at around ten minutes.

During this two-week period, 90% of the blocks being mined had to contain a piece of data called a “signal bit,” through which miners would signal their support for Taproot. With a deadline set for mid-August 2021, Bitcoin miners hit the 90% threshold a full two months ahead of schedule.

This adoption method, requiring 90% support over two-week periods with a total of three months given to reach the threshold, is called a “Speedy Trial.” Given that Taproot was able to clear the Speedy Trial with two months to spare, it can certainly be considered to have been rolled out very efficiently.

Does Taproot Affect Bitcoin’s Price?

Taproot doesn’t directly affect Bitcoin’s “tokenomics” in any way, given that it targets certain improvements to the Bitcoin network’s security, scalability, and privacy.The upgrade makes Bitcoin a more efficient payment network and adds a few elements of privacy to the network that didn’t previously exist.

These improvements to Bitcoin as a payment network could certainly have helped its price at the time, although hindsight shows that a bear market for cryptocurrencies as a whole followed soon after.

It’s far more useful to view Taproot as a stepping stone in Bitcoin’s journey, a checkpoint that elevates it as a usable product. This has no bearing on the asset itself but could certainly help in the long run as it improves the odds of true mass adoption.

Bitcoin’s Post-Taproot Future

Taproot was a widely anticipated upgrade at the time and was a landmark for Bitcoin as a major upgrade without significant opposition or the upheaval of a hard fork.It provided the network with a selection of very significant upgrades that help reduce blockchain load, making Bitcoin more effective and also just that little bit more private.

While it’s unlikely that Bitcoin will ever adopt similar privacy technology flaunted by the likes of Monero, the upgrades brought by Taproot show an encouraging direction by maintaining the network’s auditability while concealing potentially sensitive information.

Ultimately, as pristine an asset as Bitcoin is, it may need to be just as good of a payment network in order to succeed fully. Taproot is a waypoint on the road to doing exactly that.

Key Takeaways

Bitcoin’s Taproot upgrade went live in November 2021, granting it a Script upgrade as well as two key BIPs. One switched out the existing ECDSA signature scheme for Schnorr signatures, which help reduce blockchain load by reducing the amount of data committed to the chain.

The other, which gives the entire Taproot upgrade its name, implements MAST while also building on the SegWit improvements made four years prior. SegWit itself was a seminal moment for Bitcoin since it indirectly led to the hard fork resulting in Bitcoin Cash, but Taproot is significant for its far wider acceptance among the community and extremely quick adoption among Bitcoin users.

Taproot FAQ

• What is the Bitcoin Taproot upgrade?

  The Bitcoin Taproot upgrade was a network improvement for Bitcoin that combined three different Bitcoin improvement proposals. The upgrade gave Bitcoin Schnorr signatures along with several other privacy and scalability improvements.

• How can Taproot be explained?

  Taproot can be explained as an upgrade for the Bitcoin network as a whole, helping it improve its characteristics in the realms of privacy, scalability, and security.

• Are there Bitcoin Taproot NFTs?

  Given how Taproot expands the length of Bitcoin transactions, several projects have come up with NFTs on Bitcoin. However, NFTs on Bitcoin are still being explored and are nowhere near the level of sophistication of the Ethereum NFT ecosystem.