Bitcoin’s upcoming taproot upgrade and why it’s important to the network

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While a vast majority of crypto enthusiasts around the world seem to be raving about Ether (ETH) right now, and how the upcoming London Hard Fork can add even more to the value of the premier altcoin, reports have recently surfaced pointing to Bitcoin’s long-awaited taproot The upgrade will also go online sometime later this year.

In this regard, many Bitcoin mining pools (BTC) already seem to be signaling their support for activation, and according to the data available on Taproot.watch, a website designed by Bitcoin core developer Hampus Sjöberg, Taproot signaling is currently doing it about 56% off BTC’s total hashing power.

It should be noted that two of the largest Bitcoin mining pools by hash rate – AntPool and F2Pool – have been major proponents of this upgrade from the start. Other relatively large mining operators such as Foundry USA and Slush Pool have also expressed their support for activation.

What exactly is taproot?

In the simplest sense, Taproot can be seen as the newest step in the evolution of Bitcoin, as the upgrade is not only intended to improve the overall usability of the network by making transactions cheaper, faster and easier, but ultimately also to enable the provision of intelligent contracts.

In addition to this, Taproot also suggests significant data protection pledges – i. H. An attempt should be made that all transactions look the same for everyone except the transaction partners. This potential stealth-based framework appears to have been inspired by security-focused crypto offerings available on the market today, potentially bringing Bitcoin closer to some privacy-conscious coins, at least from a design perspective.

On this issue, Antoni Trenchev, co-founder and managing partner of the crypto lending platform Nexo, told Cointelegraph that the proposed taproot update is proof of Bitcoin’s decentralization and that the network is always looking to improve and grow. He also believes the upgrade is a reminder to investors that unlike gold, Bitcoin is a dynamic store of value in every way, adding:

“All of these admittedly significant improvements pave the way for an even wider adoption of Bitcoin and continued price increases. Overall, Taproot is one of the most anticipated updates from BTC since the 2018 block size upgrade. “

Joel Edgerton, chief operating officer of cryptocurrency exchange bitFlyer USA, told Cointelegraph that most in the crypto community seem to be focused on Bitcoin’s price movement right now, but they overlook the fact that BTC’s underlying technology is actually what it actually offers Taproot is an important development for several reasons:

“First, it reduces the size of the transaction data, which could lower transaction fees for complex transactions. In addition, it increases the privacy of multisig and time-locking wallets by making them difficult to distinguish from simple single-sign wallets, while also enabling improved wallet functionality by allowing developers to use vaulting logic. “

According to Edgerton, Taproot shows the maturity of the Bitcoin community and how everyone has apparently learned valuable lessons from the Bitcoin upgrade wars of 2017. That said, it is of the utmost importance to plan and execute upgrades using a decentralized, community-based vote.

Back in 2017, Bitcoin underwent a hard fork, which led to the creation of a new cryptocurrency called Bitcoin Cash (BCH). Although the process was fairly straightforward, the time to the hard fork was fraught with argument and many members of the core community clashed.

A technical glitch

On paper, Taproot is an elegant technical solution that was developed using proven cryptographic foundations and can help to improve the Bitcoin protocol evolutionarily.

Lior Yaffe, CEO of the blockchain software company Jelurida, pointed out to Cointelegraph that by combining Schnorr signatures and Merkelized Abstract Syntax Trees (MAST), Taproot can convert the representation of complex Bitcoin transactions such as transactions with multiple signatures and transactions in use by one Set up Lightning channel that looks like a normal Bitcoin transaction when sent in the chain.

In cryptography, a Schnorr signature is easily “demonstrably fair” and functionally superior to conventional logarithmic signatures, which are routinely confronted with problems related to unsolvability. Similarly, MAST are unique digital offerings that can provide various user selected conditions that must be met in order for a charged number of bitcoins to be spent.

Overall, this reduces storage space and can indirectly lower the fees for these types of transactions. In the long run, if used widely, Taproot can potentially improve the privacy of Lightning and multi-signature users significantly. “From an ecosystem perspective, I see Taproot as an all-out effort by Bitcoin developers and the Bitcoin community to finally make the Lighting Network a mainstream payment platform,” added Yaffe.

How does Taproot affect BTC?

Another aspect of the proposed upgrade that should be considered is whether Taproot will have a significant impact on the future price development of Bitcoin. In that regard, Edgerton sees no short-term impact of activation on the value of Bitcoin. However, he believes the under the hood changes resulting from this update will make the Bitcoin network more functional and competitive.

Yaffe believes that by improving the adoption of the Lightning Network – i. H. By reducing transaction fees and processing times – Bitcoin and its ecosystem will remain a relevant payment method in the Internet age in the long term.

“Given that the recent spike in Bitcoin price is more due to its potential use as a store of value and acceptance by institutional investors, I don’t expect Taproot to have a significant short-term price impact.”

Finally, Siddharth Menon, co-founder and chief operating officer of Cryptocurrency Exchange WazirX, told Cointelegraph that the latest Taproot upgrade has been eagerly awaited since 2010 and should have a positive impact on the currency. “Slowly but surely, this network is getting better every day,” he added.

Other important aspects of Taproot that are worth considering

According to Bitcoin’s community consensus, the aforementioned taproot activation only gets the green light if 90% of all mined blocks contain an activation signal within a difficulty adjustment window (2,016 blocks). In particular, the consensus agreement must take place in one of the difficult times between now and August 11th so that the network upgrade can go ahead as planned in November.

By May 7th, a total of 327 signaling blocks had appeared in the current window, while miners responsible for 610 blocks decided not to include a “signal bit”. The negative votes cast by these miners currently make up 30% of the 2,016 blocks in the current difficulty window. Some pools that have so far voted against activation are big names like Poolin, Binance Pool, BTC.com, viaBTC, and HuobiBTC.