What is Taproot?

Published On: July 28th, 2021


Bitcoin’s blockchain network is what makes the cryptocurrency and the transactions and operations made with it work: it is susceptible to upgrades and improvements. And that is exactly what is happening now, as the major mining pools have started preparing for the new network upgrade, called Taproot. What is Taproot? 

As we have discussed in previous articles about the blockchain scalability trilemma, we know that privacy, scalability and security are very important concerns within the crypto community. While Bitcoin remains the most popular cryptocurrency, these issues still need to be resolved and sooner rather than later. Taproot’s goal is to do just this: change the way Bitcoin scripts operate to improve privacy, scalability and security. 


What is taproot and how will it benefit Bitcoin’s network? 


Taproot can be considered the latest step in Bitcoin’s evolutionary path, as the upgrade not only seeks to improve the overall usability of the network by making transactions cheaper, faster and easier to implement, but also to eventually enable the deployment of smart contracts. 

It is an upgrade, a “soft fork” designed to improve Bitcoin’s efficiency and security. Likewise, Taproot also proposes significant privacy promises, for instance, iit intends to make all transactions look the same to everyone except the transacting parties. In what way? It will make it impossible to distinguish whether a transaction within the network is conventional or advanced, which will enhance privacy. It will also make attempts to track Bitcoin users more difficult. This potential camouflage-based framework seems to have been inspired by the security-centric cryptocurrency offerings available in the market today and this could bring Bitcoin closer to some privacy-centric currencies, at least from a design standpoint. 

Without Taproot, anyone can detect transactions that employ complex functionalities – which require the creation of multiple transactions. However, the Taproot update will make it possible to “cloak” all components of a Bitcoin transaction that includes these features. Even if the transactions have these functions, they will have the same appearance as a single transaction. Taproot makes it possible to hide the fact that a Bitcoin script has been executed. For example, spending Bitcoin using Taproot could make a transaction on a Lightning Network channel, a peer-to-peer transaction, or a sophisticated smart contract indistinguishable. Anyone reviewing such transactions would see nothing more than a peer-to-peer transaction, although the wallets of the final sender and receiver would still be visible. This represents a major victory for Bitcoin privacy advocates.

Taproot is expected to be implemented along with another update called Schnorr signatures. This not only makes the implementation of Taproot possible, but also enables a long-awaited feature called signature aggregation.


What are Schnorr signatures? 


It is a solution proposed in the Bitcoin network that seeks to improve the privacy and scalability of the system, by allowing a set of signatures of transactions with the same entry to be replaced by a single signature -known as signature aggregation-. This reduces the storage space occupied within a block and, in turn, allows transactions to be confirmed much faster, improving network performance. The proposed improvement through Schnorr signatures was presented by Pieter Wuille in 2019.

This new signature scheme also makes it possible to improve the security of the network, against potential attacks. With this scheme, an attacker would have to send much more transactions to occupy the same space within a block, making the attack become more costly and less feasible. 


How will taproot benefit the Bitcoin network? 


As we discussed previously, Taproot will contribute to improving the privacy of the Bitcoin network by making conventional transactions and advanced transactions indistinguishable. In addition, it will make it more difficult to track Bitcoin network users and transactions. Taproot implementation along with Schnorr signatures could improve the scalability of the Bitcoin network by reducing the demand for storage space within blocks. Taproot will also enable greater adoption of the Bitcoin system by reducing transaction confirmation times and making transactions lower, making the cryptocurrency more fungible and making people want to trade with it. Another benefit of the upgrade is the fact that signatures will no longer be malleable, which is a known security risk in the Bitcoin network. Signature malleability means that it is technically possible to alter the signature of a transaction before it is confirmed. By doing this, the attack would make it appear that the transaction never happened. 




The updates will be available to Bitcoin users once the community accepts and performs the necessary soft fork to update the network. According to Bitcoin community consensus, Taproot activation will only receive the green light if 90% of all mined blocks include an activation token within a difficulty setting window (2,016 blocks) so that the network upgrade can take place as scheduled in November. There is much anticipation for this new functionality and many expect Bitcoin Core to implement all the necessary changes to take this step in pursuit of Bitcoin and its evolution as an ecosystem. Taproot is a highly anticipated and supported Bitcoin update. If implemented along with Schnorr signatures, we will see significant improvements in terms of security, privacy, scalability and more.

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