The Bitcoin Taproot upgrade improves the network because the BTC price may have limited impact


Bitcoin is set to Make a major network upgrade, Taproot, in the past two days, that is, after November 14 or 255 blocks, according to data From Taproot.watch.This is the first major upgrade since then Segregated Witness (SegWit), And finally in development and launch 2018 Lightning Network. The original Taproot proposal was Make Published on January 23, 2018 by Gregory Maxwell, Bitcoin Core contributor and former Chief Training Officer of Blockstream.

Although the previous SegWit upgrade was designed to address transaction scalability and improve the scalability of the Bitcoin network, the Taproot upgrade was designed to improve transaction efficiency, network privacy, and its ability to support smart contract initiatives.The upgrade was started after Bitcoin mining nodes reached a 90% consensus on June 12th, because Announce Posted on Twitter by Bitcoin developer Hampus Sjöberg. Sjöberg also created the Taproot.watch website to track Taproot upgrade updates.

Ben Caselin, head of research and strategy at cryptocurrency exchange AAX, told Cointelegraph, “Bitcoin’s Taproot upgrade is one of the most influential changes that will be implemented on the network. The upgrade brings smart contract functionality to the protocol and optimizes it Cost efficiency and privacy.”

He also pointed out that even though many high-performance protocols are already in operation, the smart contract function of Bitcoin is also very important. He said: “We must remember that Bitcoin is the only non-sovereign network that truly provides the highest degree. cyber security.”

MAST and Schnorr signature

The soft fork will introduce Merkelized Abstract Syntax Tree (MAST). This tree will introduce a condition that allows the sender and receiver of the transaction to sign the transaction together for settlement. Merkle tree is an established compact and complex data structure, invented by Ralph Merkle, one of the inventors of public key cryptography.

Currently, Bitcoin uses Pay-to-Script Hash (P2SH) to ensure that only the script’s hash runs on the chain. Therefore, when using tokens, the underlying technology must display all conditions that may have been met, including conditions that have not been met in the transaction. The disadvantage of this is that the amount of data is large, which is unnecessary, and it is not ideal for privacy, because anyone on the blockchain can investigate how the funds are used, the type of wallet used, and possibly more Such details.

MAST ensures that the various conditions under which funds can be used are hashed separately and included in the Merkel tree, which will produce the Merkel root, which is a single hash. This ensures that only the conditions that are met need to be displayed, making the network more data efficient than the previously used P2SH contracts.

In addition, the Taproot upgrade will introduce Schnorr signatures. The algorithm will allow users to aggregate multiple signatures into a single transaction, making it difficult to distinguish between regular transactions and multi-signature transactions. Essentially, if there is a MAST structure in the token or transaction at any time, these signatures will be hidden.

Igneus Terrence, communications director of Bybit, a cryptocurrency derivatives exchange, talked to Cointelegraph about the details of the upgrade:

“Using the trinity of Schnorr signature, MAST and Tapscript, Taproot allows to reduce unnecessary data collection in the output of Bitcoin network transactions without sacrificing security. Since the amount of data collected and transmitted is small, the benefits for the end user will be reflected In terms of better privacy, higher efficiency and lower transaction costs.”

Terrence also mentioned that the Taproot upgrade will have a compound effect on the Lightning Network launched in 2018. After this soft fork, simple and complex multi-signature and Lightning Network transactions will be treated equally on the network. This will unlock the true potential of the Lightning Network by improving efficiency and reducing discrimination against substitutability.

Marie Tatibouet, Chief Marketing Officer of Gate.io, spoke to Cointelegraph about the greater impact that the Lightning Network has had, especially with the adoption of Bitcoin as legal tender in El Salvador. She said: “Strike-one of the most popular Lightning Network wallets-is responsible for powering the crypto ecosystem in El Salvador. During the three-month period from May to July 2021, the number of Lightning Network nodes increased from 10,000 It jumped to 23,000. As far as the current situation is concerned, it is estimated that by 2030, the number of Lightning Network users will reach 700 million.”

Although the upgrade will allow the deployment of smart contracts and is the next logical upgrade of the Bitcoin network, it is unrealistic to compete with Ethereum, the most used smart contract blockchain network in the short term. In this regard, Tatibouet said: “Although a proper contract will take some time to function properly, the utility and user base it brings will definitely be impressive. However, don’t expect Bitcoin’s smart contract ecosystem to surpass anytime soon. Ethereum.”

Anto Bukov, the co-founder of the decentralized cryptocurrency exchange 1inch Network, has a more absolute view on smart contracts. He told Cointelegraph, “It was not designed for this purpose. Bitcoin is based on the UTXO model and is not suitable for smart contracts. Cardano recently proved this.”

Limited short-term price impact

For Bitcoin as an investment asset, the days before the upgrade are also very interesting.The token hits briefly A record high of $69,000 on November 12 Before plummeting by nearly US$7,000 to below US$63,000.Current token trade According to data from CoinMarketCap, it is slightly less than $64,000. The asset’s current market value is more than 1.2 trillion U.S. dollars and has remained at the coveted 1 trillion U.S. dollar mark for nearly a week.

However, the impact of this upgrade may have been factored into the current price of the asset. Bukov further talked about the impact on end users. He said: “We have noticed interesting technical improvements in Taproot, but apart from marketing, it has almost no impact on users.”

Caselin seems to be more optimistic about the long-term price impact of this asset. He mentioned, “Instant soft forks have been priced. Anyone who knows and cares about Bitcoin knows Taproot and will adjust its exposure accordingly. Nevertheless, because Bitcoin is still below its fair value, it is generally expected that this month Soaring further, so Taproot may provide momentum. Nevertheless, in terms of its potential, Taproot is not priced at all.”

Since the Taproot upgrade will reduce the transaction output on the network, it provides the possibility to deploy complex smart contracts. One difference from other blockchain networks that already have advanced smart contract utilities such as Ethereum and Solana is that Bitcoin’s currency function and excellent network security can attract long-term liquidity in the network. This is an aspect that various decentralized finance (DeFi) protocols built on platforms such as Ethereum are currently working hard to solve, and are being solved by DeFi 2.0.

Kesling talked more about the impact on the market, saying: “Bitcoin may take some market share from the smart contract platform; however, mainstream DeFi participants are more likely to insist on using Ethereum, Solana and similar protocols. . Bitcoin is more suitable for more serious business-and serious capital.”

Regardless of the short-term price impact that the Taproot upgrade may or may not have on Bitcoin, it is clear that the Taproot upgrade, as the network’s first upgrade in four years, is an important step for the network as it further improves its fundamentals. In the long run, this upgrade will drive value and can be seen as another step towards “super Bitcoinization.”