Lock Bitcoin Taproot to improve privacy and introduce smart contracts

On June 12th, Bitcoin (Bitcoin) The mining pool Slush Pool mined blocks 687,285, and the transaction included a Taproot upgrade activation signal. During the difficult period from May 30th to June 13th, this particular block was the 1,816th block containing the Taproot signal activated by a BTC miner.

In each difficult period, 2,016 blocks are created, and 1,816 blocks are crossed by the Taproot activation signal to meet the 90% signal threshold required to lock the upgrade. This event means that Bitcoin’s first protocol upgrade in more than four years, Taproot, is expected to enter the activation phase in mid-November.

In addition to ending the signal cycle of three consecutive difficult periods lasting about six weeks, block 687,285 also brings a new milestone for the Bitcoin upgrade under development since 2018. BTC supporters said that in addition to the automatic activation that occurred near the end this year, the focus should shift to building wallets and other ecosystem applications to take advantage of the improved scripting capabilities that Taproot brings.

What is the taproot?

Before diving into what Taproot is and how it works, at least a high-level explanation of how Bitcoin transactions work may be important. When sending BTC from one wallet to another, the sender’s public address uses the private key to create a unique cryptographic signature.

The encrypted signature contains the necessary permissions and can be used as a proof for any node to verify the transaction, that is, the sender really owns the funds sent to meet the spending conditions. Different spending conditions can be created for unspent transaction output (UTXO).

When UTXO is spent, it is necessary to display all the spending condition data-the conditions that are met and the conditions that may be met-this feature will bring a lot of data usage and privacy impact. Taproot is an upgrade designed to solve this problem by blocking the spending conditions, except for the spending conditions in the script branch agreed by the transaction parties.

In a conversation with Cointelegraph, Bitcoin developer and former Square cryptocurrency grant recipient Riccardo Casatta outlined the basic premise behind Taproot and pointed out: “The Taproot upgrade includes a series of improvements. In the long run, the most important It enhances privacy.” According to Cassata:

“One of our misunderstandings today is that the use of Bitcoin is mostly private, but in fact, transaction activities leave a lot of traces on the blockchain. For example, Bitcoin is sent to different addresses-for example, according to version And the smart contract behind it starts with “1”, “3” or “bc1″. This is a problem because it reveals information about user spending.”

Using Taproot, the public keys of all participating entities can be combined in a transaction to create a unique key. By creating a new output called Pay to Taproot (P2TR), the output condition of locked funds can be set to a single public key instead of a single key or script hash that requires a complete accounting of all the spending conditions contained in UTXO .

Combining multiple signatures into a single aggregated signature is based on Schnorr signatures. Taking advantage of the linear nature of Schnorr signatures, Taproot proponents say that it is possible to make multisig and single-signature counterparts indistinguishable, or as Castta said:

“For the taproot, in the most common case, different spending conditions may look the same, which is good because it reveals less user information and it also improves efficiency.”

Miners almost unanimously support

As previously reported by Cointelegraph, Bitcoin’s Taproot upgrade Achieved a 90% critical consensus Between the mining nodes on June 12. Indeed, the process has almost universal support from miners, and all recognized mining pools have signaled Taproot.

Slush Pool started this process in May, using Taproot activation signals to mine the first transaction block. The fifth largest Bitcoin mining pool calculated by hash rate distribution is also brought by the miners responsible for the actual lock upgrade, which may be appropriate.

Although the process of starting the signal period slowed down with China’s May Day celebrations, the consensus of miners to support the upgrade began to reach a significant proportion in the second difficult period. This near-uniform support reinforces the commitment expressed by miners before they plan to upgrade to Bitcoin Core at the end of 2020.

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In the first month of the process, the initial delay to reach the required 90% consensus may be due to some miners needing to adjust certain firmware requirements to perform signaling. Therefore, even if it soared to around 70% in the first three days, the percentage of miner signals fluctuated between 40% and 70% during the first difficult period.

AntPool and F2Pool-ranked first and second in terms of computing power distribution respectively- Is an early supporter of activation, Just like the American foundry. By May 17, Every major mining pool is sending a signal to Taproot, Including Binance and its first transaction block. BTC.Top was late because the mining pool reported that the protocol needed to start signaling for Taproot must be tested.

Privacy, scalability and smart contracts

Several Bitcoin developers agreed that Taproot will significantly improve Bitcoin’s privacy. In a conversation with Cointelegraph in early June, Pieter Wuille, the Bitcoin developer of Chaincode and one of the earliest supporters of the Taproot upgrade, commented:

“it [Taproot] Extend Bitcoin’s scripting capabilities in some way to make certain things cheaper (especially more complex applications such as multi-signatures and second-tier things), and to be more private by often hiding exact spending rules. “

In addition to masking certain spending conditions and making transactions indistinguishable, Taproot also significantly reduces the block space occupied by transaction data. Although this feature reduces transaction throughput by compressing the data size associated with multi-signature transactions, it is not a panacea for solving Bitcoin’s scalability problems.

However, it opens the door to smart contracts on the Bitcoin blockchain, as the upgrade has reduced the amount of space required for multi-signature transactions in the block. Smart contract transactions essentially involve interactions between multiple addresses and users.

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Using Taproot, these smart contract operations seem to be no different from simple wallet-to-wallet BTC transfers. Cassata detailed some possible smart contract use cases that may emerge after Taproot is activated later in 2021. Cassata told Cointelegraph:

“In the medium and long term, I see an increase in the use of Bitcoin smart contracts, enabling use cases such as inheritance and delegation in company spending. The best part is that by looking at the blockchain, we won’t know this. .”

Many Bitcoin developers agree that after activation in November, network participants will need to create useful applications based on the upgrade. The upgrade itself will be activated at block height 709,632 in accordance with the terms of the Bitcoin Improvement Protocol 341 (BIP-341).

Taproot will be a soft fork upgrade, which means that network participants will not necessarily accept this change. However, given the cost advantages that the upgrade may provide, service providers may update their software to implement Taproot.