“Bitcoin the largest cryptocurrency by market cap underwent the taproot upgrade on 14th November 2021 to streamline its transactional processing to increase the speed of transactions and to decrease the cost”.
What is Taproot Upgrade
As the Bitcoin Network is being adopted all around the world, the number of users using the network is on the rise and this has created huge problems in terms of scalability. The Bitcoin network is becoming slow and the cost of the transaction is increasing. To provide a better scalability solution, on 14th November 2021 and at the block height of 709,632 a soft fork named taproot was executed on the Bitcoin network.
The Tap Root upgrade consists of 3 BIPs (Bitcoin Improvement Proposals) namely BIP340, BIP341 and BIP342. The upgrade is being viewed as the most prominent upgrade after the SegWit upgrade in 2017 and is expected to have a profound impact on the Bitcoin network for the upcoming 3-5 years. The upgrade will be highly beneficial to the institutional users who require multi-signature transaction scenarios.
In the upgrade the Elliptic Curve Digital Signature Algorithm (ECDSA) is replaced with more efficient Schnorr signatures. The ECDSA has the capability of verifying the signatures one by one and this will be replaced by Schnorr Signatures which will combine various transactions and various signals together to ensure that they are verified at the same time thus increasing the speed of the transactions on the network.
The tamper proof block structure of Bitcoin blockchain is based on the Merkelised Abstract Syntax Trees (MAST) which is a tree structure in which the hash of the transaction is generated from bottom to top to ensure that the transactions are in sequence and a final hash is generated at the end by combining all the transactions. Any change to the transaction will result in a change in the hash value of the block and thus makes it tamper proof. With the implementation of the Schnorr signatures, the improvements to MAST will be incorporated which will help in reducing the transaction data volume and thus will help in increasing the transactional efficiency.
Benefits to Bitcoin Network
The following benefits will be reaped by the Bitcoin network due to the Taproot upgrade:
Increase in Efficiency
The multi-signature signing approach will help in increasing the transaction verification process leading to a highly efficient network and reducing transaction delays.
Decrease in Cost
The better transactional throughput will ensure that the fee for the transaction will be quite low as there would be no crowding of the blockchain as more users join the network.
Due to the aggregation of the transactional data and the signatures, the privacy of the transactions will be enhanced as it will be difficult to identify the individual transactions when they are aggregated with each other.
Disclaimer: The article is meant for the educational purpose only and in no way it should be considered as financial advice. Own research on the topic is advisable.
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