Bitcoin remains the first-ever flagship cryptocurrency to have ever surfaced while bringing with it the idea of decentralization and the promise of utmost security and scalability through the implementation of blockchain technology. Bitcoin launched in 2009, and at the moment, the concept was extremely weird, no one understood it, and people didn’t see any kind of improvement or value in the idea of cryptocurrencies whatsoever. You can see that it remained a pretty raw and insignificant concept until 2012.
That was the time when Bitcoin did see awesome movement across the globe as more and more investors were coming in to understand what Bitcoin is, how cryptocurrencies can help them scale their businesses, and moreover, why blockchain technology is the future of finance. In 2013 Bitcoin saw a major increase in price and value as multiple enterprises started trading in Bitcoin, the crypto market came into being, other altcoins were being developed and programmed around the same infrastructure and values as Bitcoin but using different algorithms and propagated technologies to deal with the validation of transactions along with the formation of blocks.
You can say that initially, Bitcoin was a mere sketch of what blockchain technology can do; it didn’t have any kind of implementations from the blockchain technology or other associated infrastructure at all. With the passage of time, multiple updates were launched and were made a definitive part of Bitcoin as the cryptocurrency continued to move further. The latest and most recent update to ever become part of the Bitcoin network is known as the taproot upgrade, and it got implemented in November 2021. This upgrade promises utmost scalability, enhanced privacy, and security for the end-user.
It remained an extremely anticipated upgrade in the crypto world, and at the end of 2021, it was finally implemented and made part of the Bitcoin network. Taproot upgrade is implemented with Schnorr Signatures which is another update in itself, but later on, the developers deemed fit to launch both in an individual packet so that the initial goals that the developers had in mind about scalability, security, and privacy of the network could be reached right then and there without stretching this thing any longer.
In the crypto world, the privacy of the user, security of the transaction, and scalability of the network are some of the most concerning issues, and therefore consistent development and implementation of certain systems are being done by the developers of different cryptocurrencies to ensure that they stay ahead of these troubling matters and could focus more on improving the network.
A Brief Introduction to Taproot Upgrade
It goes without saying that the crypto market is an extremely volatile financial entity. You might see great returns on one of your investments, but then, later on, a horrific event might transpire, sending the prices of these cryptocurrencies down to the earth. Bitcoin might be and is the most vital and anchoring cryptocurrency in the crypto space, but even that status doesn’t lend Bitcoin any immunity from the extreme volatility that the crypto market depicts. Bitcoin has had multiple ups and downs in the past as prices were soaring at a certain period of time, but then, later on, these were plummeting and crashing so hard that investors lost all of their faith in the flagship cryptocurrency.
There have been multiple issues with Bitcoin in the past, such as extremely annoying transaction intervals which took multiple days to be completed, errors with the implementation of transactional data into dedicated blocks, and multiple others but most of them have been patched now and are not a tiring concern at all. But among these issues, the privacy of the user remains an outstanding one, and still, a lot of work needs to be done to ensure that the data of the user, along with any information that they have submitted while transacting in Bitcoin, remains completely anonymous.
For some people, the down-to-earth aesthetics of the crypto market where each and every person can access the data of a particular transaction remains an extremely nauseating concern. They don’t want anyone to see just how much crypto they have transacted, who was the sender and receiver, and other such information because all of this is being done in an anonymous capacity which is very much the prospect of decentralization and blockchain technology in the first place.
There are unorthodox practices that you can take up for the sake of making your Bitcoin transaction completely anonymous, but that also doesn’t work in 100% capacity. Bitcoin is not a completely private currency, it belongs to the public, and therefore the data is always up and available for anyone to intercept. You might be thinking if even the most crucial data of a particular transaction is made available when it comes to public data? It is not like that, but the whole transaction is up for review by any random person or user that might or might not have anything to do with Bitcoin.
All the transactional data for Bitcoin is public information. There is a lot of talks that the Taproot upgrade will be able to fix a lot of these concerning issues, but it doesn’t promise that the network would become 100% anonymous because, at the heart of the Bitcoin blockchain network, it will remain a public entity and not a completely private one. There has been a consistent lack of privacy within the Bitcoin network, and that is something that could now be fixed with the help of the Taproot upgrade.
Any update that is made part of the blockchain network for Bitcoin is not passed by the developers or a voting body. The upgrade is circulated across all the active miners of the network across the globe, and only after they have reached a consensus together does the update go live. The same thing happened in the case of the taproot upgrade because it couldn’t be made part of the Bitcoin network without first taking approval from all the miners across the globe.
Bitcoin Network’s Limitations
As explained multiple times before, Bitcoin as a network and crypto is not 100% mature or safe from those anomalies and shortcomings that circulate the financial entity. It has its fair share of shortcomings that are being dealt with as time progresses, but for the time being, we will be listing a few present things that are wrong with Bitcoin. First of all, the transaction speed is extremely slow, and you don’t want your transaction to be under review for more than 48 hours only to know that it hasn’t been taken up by any of the miners out there because it was a fairly redundant one.
Just because the volume of your transaction is not a significant one doesn’t mean that it shouldn’t be facilitated right off the bat, as other Bitcoin transactions are being facilitated at the moment. The initial build of Bitcoin propagates only seven transactions to get completed each second, but with the passage of time as multiple users approached Bitcoin, the transaction speed was increased and, therefore, the fees associated with each and every transaction.
You would think that just because you are a regular Bitcoin user and perform multiple transactions, then it doesn’t mean that you would have to pay a transaction fee each time you access the cryptocurrency? But in reality, you have to pay a transaction fee each time you perform a transaction in Bitcoin; it doesn’t matter if you are a new user or a loyal one; the transaction fee is something that you can’t get out of. By the end of 2021, the price of Bitcoin was at an all-time high, and therefore the transaction fee also skyrocketed, which proposed a significant problem for traders and investors across the globe.
These high transaction fees and slow speed of the transaction are actually hindering the overall development of Bitcoin and for this crypto to become a viable success across the globe. If it were not for the hindering transaction fees and slow speed of the transaction, Bitcoin would have already been adopted by major financial enterprises out there. Another grave limitation with Bitcoin is its privacy. When the white paper for Bitcoin hit the Internet, it was mentioned clearly there that all the transactions related to Bitcoin would remain completely private and anonymous.
But later on, it was found that the transactional data for a particular transaction is visible to each and everyone in a public capacity and therefore is not completely private. You can dig up the whole buying and selling history of a particular user just by looking at the data made available over the blockchain network of Bitcoin; a separate search could also be performed by looking up a dedicated Bitcoin address over the blockchain function.
Multiple upgrades have been convened from time to time by the Bitcoin development team to mitigate these issues; however, some of these are still present even if in a minor capacity. It is not like rooting out an update for an app or a search engine like it would have been the case if it was a centralized entity. The decentralized nature of Bitcoin makes it extremely hard for developers to amend the network and propose certain changes mostly they have to wait it out until a consensus is reached by all the miners across the globe so that the motion for a particular update to be implemented into the Bitcoin network could be passed and finalized. This is something that seriously hinders the development of Bitcoin as a cryptocurrency, and therefore the need for multiple updates is apparent.
What does Taproot Upgrade do for Bitcoin Network?
Taproot is a pretty thirsted over upgrade not only by the developers but active traders and investors of Bitcoin because they knew that as soon as the update would go live, the privacy, efficiency, as well as security of the network would improve by 1000 paces, and this is something that everyone wants. It is a soft fork upgrade that is going to improve the scripts of Bitcoin, which will ultimately be able to achieve all those goals mentioned above. There are three different Bitcoin improvement proposals embedded into the taproot upgrade.
There is the taproot, tabscript as well as core for the whole upgrade. The core of this update is based on a new digital signature scheme that is known as Schnorr signatures. With the help of the taproot upgrade, multiple benefits would be able to come to the Bitcoin network and therefore the end-users, there will be more transparency in terms of the data that is shared with the public, strengthening the privacy of the users and allowing them to tinker through these settings however they see fit as well as lowering the transaction fees. This is going to act as an arrow that is going to take multiple targets off of the back of Bitcoin and the problems that the crypto has been facing for some time now.
At the same time, the taproot upgrade will also allow the Bitcoin blockchain system to be able to execute multiple complex transactions while increasing its use case to compete for head to head with Ether and the smart contract capabilities that the blockchain of Ether has. This will help Bitcoin to finally step into the decentralized finance space along with non-fungible tokens as well as the development of decentralized apps could finally start on the Bitcoin blockchain.
This is a massive feat, and with the help of the taproot upgrade, it will finally be orchestrated the way it’s meant to be. It is believed that there was a consensus reached on the inauguration and implementation of the upgrade by more than 90% of the miners, and that is when the upgrade finally went live. Should more than 50% of the miners have neglected the probability of the upgrade going live, then it would have been suspended altogether.
Working Principle of Taproot Upgrade
As explained earlier, there are three distinctive Bitcoin improvement proposals that work in harmony to engage with the blockchain of Bitcoin to increase the efficiency of the network improve privacy and security along with multiple nodes.
Schnorr Signatures
The Schnorr Signatures help in the proper compensation of a secure and relatively faster process for the sake of validating transactions that take place on the Bitcoin network. If you are a trader or investor who has previously worked with Bitcoin, then you already know how slow these transactions can be. It works on a specific cryptographic signature scheme that was earlier developed by a cryptographer and mathematician from Germany. Claus Schnorr did have a patent to protect the algorithm that he developed for many years, but in 2008 the claim of the patent got expired.
That is why its use case was administered into Bitcoin. These signatures are pretty much known for the efficiency and simplicity these have in terms of generating multiple short signatures. In the earlier days of Bitcoin development, the developer of Bitcoin Satoshi Nakamoto adopted an eclipse curved digital signature algorithm because of its wide usage and convenience among many disciplines and enterprises over the globe, and also for the fact that it was completely open-source.
The Schnorr signature is now implemented into the blockchain network of Bitcoin, and it could be the beginning of a completely new generation of these signatures for Bitcoin along with other blockchain systems. One of the most elementary benefits that these digital signatures enjoy over previous classes of signatures that were used and incorporated into the Bitcoin network is that these can undertake several keys within complicated Bitcoin transactions while developing a unique signature that is individual and doesn’t have any layered integration with multiple signatures which make the storage of the data into the blocks quite complicated.
This helps in the aggregation of multiple signatures from different parties that were involved in a dedicated Bitcoin transaction into an individual signature. This helps in the proper assortment of these transactions into their dedicated blocks and simplifies the overall process of validating transactions within the blockchain environment of Bitcoin.
With the help of the taproot upgrade, it would be as if no Bitcoin script did run at all. But here, all those long and linear blocks would just be compressed into a single unit having all the information embedded into an individual block for easier navigation and transportation of data. It helps in improving the privacy of the users because anyone who would be seeing the Schnorr signature would only be able to witness a peer-to-peer transaction and nothing more. But even so, the wallet addresses of the sender and recipient will get exposed in some capacity. Currently, there is no workaround.
Tapscript
The transcript is nothing but a coding language that is going to upgrade the very script of Bitcoin to make way for the other two Bitcoin improvement proposals. It has multiple codes aligned in a linear formation to instruct the blockchain on how transactions must be performed. With the help of this potential upgrade in the near future, smart contracts functionality would also become available in bitcoin’s blockchain.
