What Is Taproot?

What Is Taproot? — VegaX Holdings

There is a common misconception that bitcoin never changes since there can only ever be a maximum of 21 million bitcoins and nobody knows who the real Satoshi Nakamoto is. However, the bitcoin protocol does undergo upgrades, although these particular upgrades don’t occur very often. The most recent was locked in for activation not too long ago in early June 2021 and is set to activate in November.

On block 709,632 which will be reached in mid-November, the new rules that have been described in the Bitcoin Improvement Proposals (BIPs) will activate and will start being enforced. These upgrades that will activate in November 2021 are called Taproot and represent the biggest changes to the bitcoin protocol since 2017. Taproot is what is known in the industry as a soft fork.

Taproot: A New Bitcoin Soft Fork

A fork occurs at the point where the software is copied and then modified. The original project still exists, but it is separate from the new project which goes in a different direction.

What Is A Hard Fork?

An example of a hard fork is when in 2017, bitcoin broke into two separate chains, Bitcoin (BTC) and Bitcoin Cash (BCH), a new chain. The hard fork happened after a disagreement over the best way to scale the network, with Bitcoin Cash supporters wanting to increase the block size, and Bitcoin supporters not wanting to make the change.

What Is A Soft Fork?

A soft fork is somewhat less extreme, as the upgraded nodes can still communicate with the non-upgraded nodes. The upgraded nodes still communicate with the nodes that aren’t implementing the new rules, but the upgraded nodes filter out some of the information that is passed to them from the non-upgraded nodes.

What Is Segregated Witness?

The last major soft fork to occur prior to Taproot was the Segregated Witness (SegWit) fork in 2017. SegWit changed the format of blocks and transactions, however, it allowed old nodes to still validate blocks and transactions since the formatting didn’t break the rules. SegWit was simply designed so that some fields were illegible unless nodes switched to the newer, upgraded version.

SegWit allowed the block size limit to be increased by removing signature data from the bitcoin transactions. Since these parts of the transaction were removed, this increased the available space, allowing more transactions to be added to the blockchain.

Segregate in this context means to separate and witness refers to the transaction signatures, so segregated witness describes the process of separating transaction signatures.

So what is Taproot? Well, taproot can be seen as just another soft fork in the bitcoin protocol, but with a different focus than SegWit.

Taproot Specific Upgrades

Taproot is specifically intended to strengthen bitcoin’s smart contract capabilities and improve security. It will also simplify the complex smart contracts that require multiple signatures, making them appear like regular bitcoin transactions, which will ultimately make greater privacy possible. Taproot will also use a new scripting language called Tapscript.

In addition to strengthening bitcoin smart contracts, it will also lower the data size of smart contracts which will make transactions less expensive.

Satoshi Nakamoto designed bitcoin to be decentralized. Since there is no central authority that makes decisions for the protocol, consensus must be reached among the different stakeholders regarding what upgrades are implemented. That’s why it took a few years from the date that Taproot was originally proposed in order for it to be locked in for activation.

Taproot was first proposed by Gregory Maxwell in 2018. Gregory is a bitcoin core developer and the former CTO of Blockstream.

Another benefit of Taproot is that the new type of smart contract signature will simplify the process used to set complicated conditions for transactions. It will also make transactions on the Lighting Network less expensive and more private.

The Importance Of Taproot’s Impact On Privacy

One of the biggest issues surrounding bitcoin is related to privacy on the bitcoin blockchain. Since bitcoin’s blockchain is public, anyone who wants to can view the transactions that take place on the network.

So far, people who are concerned about privacy issues and maintaining anonymity have used techniques such as coin mixing to try to increase their level of privacy on the network, however, the problem with privacy on the network as a whole still persists.

Taproot has been a highly anticipated upgrade because of its potential to help increase the level of anonymity on the bitcoin network.

Signaling Support For Taproot

The Taproot upgrade is supported by a majority of the bitcoin miners. Parameters related to the upgrade required that at least 90% of the blocks mined over the course of a two-week period to express their support for Taproot in order for the upgrade activation to start. Specifically, 90% of the blocks mined over that specific period had to include encoded information that signaled that the miners who mined the blocks supported the upgrade in order for the upgrade to begin implementation.

What are your thoughts on Taproot? Do you agree with the support from the bitcoin miners who mined blocks over the specified two-week period? What change proposed by Taproot are you most excited about?

As always, please reach out to us with questions, comments, and suggestions! info@vegaxholdings.com

VegaX Holdings: https://vegaxholdings.com/

VegaX Holdings is the “BlackRock” of the Crypto Asset Industry. We provide investors globally with one-stop access to sophisticated and secure crypto asset management. VegaX is the first to create similar #TradFi like investment products for digital assets to provide investors better returns versus buying individual cryptocurrencies. On average, investors buying VegaX products make 30% more profit versus just holding Bitcoin.”

Learn more about how to enhance your returns with VegaX Holdings #LearnMoreEarnMore #VegaX

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VegaX: The Future of Digital Asset Management — Innovation of Proprietary Indices and Next-Gen Digital Asset Management Products. https://vegaxholdings.com

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VegaX Holdings

VegaX Holdings

VegaX: The Future of Digital Asset Management — Innovation of Proprietary Indices and Next-Gen Digital Asset Management Products. https://vegaxholdings.com

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