It’s been long coming, but now it’s here – Taproot, Bitcoin (BTC)’s largest upgrade in more than four years.
Per taproot.watch, the upgrade finally activated today at block height 709,632. According to Blockchain.com, the block’s miner was F2Pool.
The upgrade’s relevance has been widely noted, and crypto-focused research firm Arcane Research stressed that it is “arguably the most important and anticipated upgrade to the Bitcoin network” since Segregated Witness (SegWit), activated in 2017. As a reminder, SegWit led to a community split and a hard fork that created Bitcoin Cash (BCH).
Crypto exchange Kraken went further and described Taproot as “an upgrade for the ages.” They stated:
Taproot expands Bitcoin’s smart contract and scripting capabilities, enhances wallet functionality, reduces fees for multi-signature (multisig)/complex transactions, improves privacy measures, and can improve privacy on the second layer solutions like the Lightning Network.
Furthermore, it came with Schnorr, a soft fork that improves privacy, scalability, and speed, and encodes multiple keys into one.
A new type of payment
A new method of payment
Technically speaking, the Taproot upgrade consists of three Bitcoin Improvement Proposals, (BIPs), Schnorr Signatures and Taproot.
The last of these three is the most mysterious. This is a new script that eliminates the 10,000-byte limit. It allows scripts that are only partially executed, to keep the rest of the execution code hidden until they are used. It incorporates a modified version of Bitcoin’s programming language to allow Schnorr/Taproot transaction and make future Bitcoin upgrades more simple, stated Kraken Intelligence. This exchange’s team is comprised of in-house researchers.
The Arcane Research allows for a new payment type called Pay-to–Taproot (P2TR). This means that:
“Users can choose to pay for a Schnorr or Merkle root, as well as a Schnorr private key. TapScript allows users to choose whether they want to remain anonymous or public by validating newer forms transactions.
These improvements, Kraken said, allow single-signature transactions and multisig transactions to be “identical on the blockchain”.
Paolo Ardoino (Chief Technology Officer, crypto exchange bitfinex) commented on this upgrade. He said it was timely because development on Bitcoin blockchain has been moving at a rapid pace this year. It also delivers more scalability and privacy on the blockchain as well as smart contract functionality.
Taproot will unlock the power and potential of Lightning Network, bringing true scalability the Bitcoin blockchain. This will allow it to be ready for more complicated operations.”
It’s not clear if the upgrade will impact the price of BTC or if Taproot has been priced in. However, some believe that the price could rise. Two days prior to the upgrade, Lukas Ezersdorfer Konrad, chief product officer at trading platform Bitpanda, stated that Taproot arrived at a time when the crypto market was trading at an all-time high level.
The upgrade to the network may give the bulls some power to push the market higher. Taproot improves Bitcoin’s efficiency and privacy, which could lead to a higher price.
Both risks and benefits
Arcane Research said that this upgrade, as with any other, carries risks. Taproot is a soft fork upgrade so network participants don’t need to update their software in order to make the change. Taproot will still need to be updated by wallets and other services, so users shouldn’t use it “until the vast economic majority enforces it.”
“Miners activating” Taproot is not enough without users following it. If miners do not update but most users do, miners have the ability to reverse the upgrade and take Taproot funds from minority users.” said the company.
However, as fee benefits are expected, most network participants will accept the upgrade. It’s likely that it will take some time for the benefits to become apparent.
reported that almost all Cryptonews.com developers agreed that Taproot’s core capabilities will be widely used but not immediately.
Taproot is also more popular because more users are using it. This means that Taproot has a greater impact on privacy and efficiency.