Real use cases are one of the main drivers of their adoption for every crypto ecosystem, and this also applies to the Bitcoin (BTC) network. Over the next seven days, the Bitcoin protocol will be forked as the Taproot Update, which aims to improve the privacy, efficiency, and capabilities of smart contracts on the network.
Taproot is the first major Bitcoin update since August 2017, when Segregated Witness (SegWit) was introduced, leading to the launch of the Lightning Network. While the previous fork was primarily aimed at overhauling transaction resilience and improving the scalability of the Bitcoin network, the Taproot update aims to improve transaction efficiency, privacy, and support for smart contract initiatives.
The major update is set to be published after 90% consensus among bitcoin miners (mining nodes). On the same day in June 2021, Bitcoin developer Hampus Sjöberg tweeted an announcement:
The Taproot soft fork will present a Merkelized Abstract Syntax Tree (MAST), which presents a state that allows the sender and recipient to sign the transaction together.
In addition, Taproot also implements Schnorr Signature, an algorithm that allows users to combine multiple signatures into a single signature for a single transaction, reducing the inherently visible difference between normal and multi-signature transactions.
The Schnorr signature scheme can also be used to change the user’s private and public keys so that the legitimacy of each transaction can be verified. According to the original Taproot suggestion from January 2018 by Gregory Maxwell:
“I believe this design will provide as much anonymity as possible for smart contracts with a fixed party, so that they look like the simplest payment possible. Generally, this is done without additional overhead, using schematic or impractical methods that require further rounds of interaction between the two parties to the contract and without the need for to other long-term data storage.
At the time of writing, Taproot.Watch, which was created by Sjöberg, reveals that the Taproot update will be activated on November 14 after the successful redemption of 1020 pieces.
Related: Bitcoin Network Stickers Reach Record Highs for Daily Settlement Volume
Just last month, the daily estimated value of the Bitcoin network reached a record high after $31 billion in a series of transactions.
Compared to the beginning of 2020, the daily volume of settlements on the network has increased 40 times, driven by the widespread use of bitcoin in El Salvador and other jurisdictions.
“The [Bitcoin network] is currently earning $190,000 per second. Compare that to $130,000 per second for Visa for US customers and $55,000 per second for MasterCard,” said network analyst Willie Wu.