What Is Taproot and How It Will Benefit Bitcoin
What Is Taproot and How It Will Benefit Bitcoin
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What Is Taproot and How It Will Benefit Bitcoin

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Published Dec 2, 2020Updated Jan 25, 2021
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TL;DR

Along with Schnorr signatures, Taproot is one of the most anticipated technological upgrades to Bitcoin since the introduction of SegWit. Taproot's goal is to change the way Bitcoin's scripts operate to improve privacy, scalability, and security. This and more will be made possible by combining Taproot with a related upgrade called Schnorr signatures.

Anyone familiar with the cryptocurrency community knows that privacy, scalability, and security are major concerns. While Bitcoin is the most popular cryptocurrency in the world, these issues still need to be addressed. Taproot aims to do just that.


Introduction

Bitcoin has had its ups and downs, but it has proven to be the anchor that keeps the crypto-verse in firm standing. Regardless of the issues that have popped up over the years, like the Mt. Gox hack or the infamous Bitcoin hard forks, the crypto community has stood by Bitcoin.
But there are certain issues that can’t be overlooked – one of the biggest being that of privacy. With Bitcoin being a public blockchain, anyone can monitor the transactions that occur on the network. For some, that’s a major concern.
It’s possible to increase your anonymity through techniques such as coin mixing and CoinJoins. Unfortunately, however, none of these make Bitcoin a private currency. While that can’t be said for Taproot either, it may help increase anonymity on the network. 

The Taproot upgrade has been widely anticipated as a major first step toward solving Bitcoin's lack of privacy and other related concerns. But what is Taproot, and how will it benefit Bitcoin? Let's dive in.


What is Taproot?

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.

In fact, Taproot makes it possible to hide the fact that a Bitcoin script ran at all. For example, spending Bitcoin using Taproot could make a transaction in a Lightning Network channel, a peer-to-peer transaction, or a sophisticated smart contract become indistinguishable. Anyone monitoring one of these transactions would see nothing but a peer-to-peer transaction. It's worth noting, though, that this doesn't change the fact that the wallets of the initial sender and final recipient will be exposed.

The Taproot proposal was first unveiled by Bitcoin Core developer Greg Maxwell in January 2018. As of October 2020, Taproot has been merged to the Bitcoin Core library after a pull request created by Pieter Wuille. For the upgrade to be fully deployed, node operators must adopt Taproot’s new consensus rules. Depending on how this unfolds, the activation could take months.

Taproot is expected to be implemented along with another upgrade called Schnorr signatures. This not only makes Taproot's implementation possible but also enables a much-anticipated feature called signature aggregation.


What are 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.
The signature scheme adopted by Satoshi Nakamoto (the creator of Bitcoin) was the Elliptic Curve Digital Signature Algorithm (ECDSA). The choice of ECDSA over the Schnorr signature algorithm was due to the fact that it was already widely used, well-understood, secure, compact, and open-source

However, the development of the Schnorr Digital Signature Scheme (SDSS) may be the starting point of a new generation of signatures for Bitcoin and other blockchain networks.

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.



How will Taproot benefit Bitcoin?

As we’ve already discussed, Taproot will bring major improvements to Bitcoin’s privacy. When combined with Schnorr signatures, Taproot may also boost efficiency when performing transactions. Besides enhanced privacy, other potential benefits include:

  • Reduced amount of data to be transferred and stored on the blockchain.
  • More transactions per block (higher TPS rate).
  • Lower transaction fees.
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. This leaves Bitcoin exposed to the infamous double-spending problem, which could ruin the integrity of the distributed ledger.


Closing thoughts

Taproot is a highly anticipated and widely supported upgrade to Bitcoin. If it gets implemented along with Schnorr signatures, we will see significant improvements in terms of privacy, scalability, security, and more. These upgrades can also generate more interest around the Lightning Network and encourage multisig to be more of an industry standard.

Regardless of your involvement in the Bitcoin community, the added benefits of improved privacy, efficiency, and security will likely impact your experience using Bitcoin.

Do you still have questions about Taproot and Bitcoin Improvement Proposals (BIPs)? Check out our Q&A platform, Ask Academy, where the Binance community will answer your questions.