Bitcoin’s Taproot Upgrade Just Went Live. Here’s What You Need To Know
Bitcoin’s Taproot update went live on Sunday, the biggest upgrade to the network in four years.
Taproot will allow for greater transaction privacy and efficiency on the Bitcoin blockchain. It will also equip the network with smart contract capabilities, which will potentially enable the the blockchain to process transactions with predetermined conditions without middlemen.
The upgrade will introduce what is known as Schnorr signatures, a type of digital signature that allows for multi-signature transactions to appear as a single transaction.
This means that transactions involving multiple addresses (e.g. smart contact-enabled transactions in DeFi) can be consolidated into one standard transaction, therefore increasing anonymity and privacy for the addresses involved.
Schnorr signatures will also reduce the amount of data needed for multi-signature transactions, therefore decreasing the amount of time needed to process transactions and increasing the network’s overall scalability, which will ultimately lead to lower transaction costs.
The Bitcoin blockchain’s last update was in 2017. The “SegWit” update – often dubbed as the “last civil war”– resulted in the creation of an entirely new cryptocurrency known as Bitcoin Cash, developed by miners who did not agree to the SegWit.
The Taproot update is significant for Bitcoin as it propels the network beyond a peer-to-peer payment system. Smart contract capabilities means that Bitcoin may also be able to process DeFi and NFT transactions similar to blockchains like Ethereum or Solana, at a time when more investors are starting to explore the DeFi and NFT space.
Last Wednesday, Bitcoin hit a new record high of USD 69,044, climbing by 346% in the past year, therefore giving it approximately 42% of the total combined value of all cryptocurrencies.
However, one Bread writer is still unsure of Bitcoin’s long-term value, calling the network “basic”.
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