- The Taproot update offers more transaction privacy and efficiency – and, more importantly, it opens the door to smart contracts.
The first Bitcoin update in four years is now available. It’s a rare instance of stakeholder agreement, and it’s a significant milestone for the world’s most widely used cryptocurrency.
The Taproot update offers more transaction privacy and efficiency – and, more importantly, it opens the door to smart contracts, which can be used to eliminate middlemen in transactions.
“Taproot is important because it opens up a lot of doors for entrepreneurs who want to enhance bitcoin’s utility,” said Alyse Killeen, the founder and managing associate of bitcoin-focused venture firm Stillmark.
Unlike bitcoin’s 2017 upgrade, which was dubbed the “final civil war” due to the controversial ideological split that divided supporters, Taproot has nearly universal support, in part because the upgrades are relatively minor code enhancements.
What is altering?
Digital signatures, similar to the fingerprint individual leaves on every transaction, are a big element of bitcoin’s makeover.
The “Elliptic Curve Digital Signature Algorithm,” which makes a signature from the private key that controls a bitcoin wallet and ensures that the rightful owner may only spend bitcoin, is currently used by the cryptocurrency.
According to bitcoin miner Alejandro De La Torre, Taproot will include Schnorr signatures, effectively rendering multi-signature transactions unreadable.
It will not extend the anonymity of your bitcoin address on the public blockchain. Still, it will make simple transactions indistinguishable from ones that are more sophisticated and require several signatures.
In practice, this means you’ll have more privacy because your keys won’t be exposed as much on the chain. “You can kind of cover who you are a little bit better,” said Brandon Arvanaghi, a bitcoin mining engineer who now heads Meow. This startup allows corporate treasuries to participate in crypto marketplaces.
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