Bitcoin Taproot Upgrade: What it means for Inventors
Moreover, thanks to intelligent contracts it allows, intermediaries can be eliminated. The founder and co-partner of the venture firm Stillmark, Alyse Killeen, said: “Taproot matters because it opens a breadth of opportunity for entrepreneurs interested in expanding bitcoin’s utility.”
The previous upgrade in 2017 caused a divergence among the users and was thus referred to as the “last civil war.” On the contrary, Taproot receives support almost universally. It is mainly because the new changes brought entirely incremental progress to the cryptocurrency.
Bitcoin uses an algorithm called the “Elliptic Curve Digital Signature,” enabling users to leave a digital fingerprint in every transaction to ensure privacy. The signature is created from the user-specific key that commands the bitcoin wallet; this ensures that only the actual owner can spend the cryptocurrency. With the new upgrade, Schnorr signatures are added to the code to indistinguishable multiple signature transactions. This means that one cannot tell the difference between simple and complex transactions on the public blockchain. Through this novelty, major investors avoid having extra exposure to the blockchain and achieve greater privacy. Meow, a firm that implements corporate reserve participation in the cryptocurrency market, Brandon Arvanaghi, is also a bitcoin mining engineer. He states that, through Schnorr’s signatures, “you can kind of hide who you are a little bit better, which is good.”
These enhanced signatures are also groundbreaking for intelligent contracts. These contracts can be signed in any transaction. You can register your vehicle, pay your monthly rent, and so forth. Thanks to Taproot, cheaper intelligent agreements are possible and thus, they take up smaller space on the blockchain. Alyse Killeen, founder and co-partner of Stillmark, states that these contracts present “mind-blowing potential.”
The payment platform Lightning Network allows instant, faster, and cheaper transactions than bitcoin’s core protocol layer. Killeen explains as such: “Lightning transactions can be fractions of a penny… while a bitcoin transaction at the core protocol layer can be much more expensive than that”.
The CEO of crypto mining expert Marathon Digital Holdings, Fred Thiel, said: “The most important thing for Taproot is… smart contracts […] It’s already the primary driver of innovation on the ethereum network. Smart contracts essentially allow you to build applications and businesses on the blockchain”.
The upgrade activation only arrived in November, even though the plan was to unlock it in June. This long wait is considered understandable by the users and experts, especially those who remember the catastrophic results of an unsuccessful upgrade in 2013. For example, Jason Deane from Quantum Economics stated:
“Upgrades allow the – extremely remote – possibility of a bug entering the system, which would destroy confidence in the whole cryptocurrency system, effectively wiping it out – a ‘self-inflicted wound’ if you like.”