The popular cryptocurrency, Bitcoin, is going to have a significant upgrade after four years. Taproot will provide a new normal for Bitcoin investors.
Bitcoin will have an upgrade for the first time since 2017. The new update has an approval rate of 90% among miners worldwide, a rare occurrence of unanimity among all stakeholders.
Popular Cryptocurrency's Update: What is Taproot
Bitcoin's latest upgrade is known as Taproot.
According to CNBC, the update will take effect in November, and it will provide better transaction efficiency and privacy.
The upgrade will also unleash Bitcoin's potential for smart contracts, a crucial feature of its blockchain technology. It functions to eliminate the need for middlemen even during the most complicated transactions.
Alyse Killen, the founder of Bitcoin-focused venture firm Stillmark, said that Taproot is an essential upgrade. Taproot opens brand new doors of opportunity for all Bitcoin users interested in expanding the cryptocurrency's utility.
Unlike Bitcoin's upgrade in 2017, the "Last Civil War," the Taproot upgrade received universal support from all users. Taproot is even more interesting because it brings crucial changes that are incremental enhancements to Bitcoin's code.
The 2021 Bitcoin upgrade focuses on digital signatures -- an essential aspect of Bitcoin, and the entire crypto market. A digital signature works similar to a fingerprint that a user leaves for each transaction that they take part in.
Bitcoin is known for using the "Elliptic Curve Digital Signature Algorithm." It stems from the private key that controls a user's Bitcoin wallet to ensure that the correct owner can only use the cryptocurrency.
But with the rise of Taproot, Bitcoin will shift to "Schnorr signatures." This upgrade could affect other cryptocurrencies, like Dogecoin and Ethereum.
According to Alejandro De La Torre, the Vice President of Poolin, Schnorr signatures make multi-signature transactions unbreakable and unreadable.
As a result, it technically provides better privacy to each user because their keys would not have that much exposure on the chain.
Brandon Arvanaghi, a former security engineer at Gemini, stated that users could kind of hide who they are with the use of Schnorr signatures.
But do not worry because Schnorr signatures do not equate to anonymity. It just provides better privacy by making simple transactions indistinguishable.
Schnorr Signatures' Effect on Smart Contracts
CNBC also said that Schnorr signatures would be a game-changer for smart contracts. These contracts are self-executing agreements residing on Bitcoin's blockchain.
In theory, smart contracts can be used in any form of transaction, from a user's monthly rent to purchasing a vehicle.
The Taproot upgrade can make smart contracts smaller and cheaper in terms of the space they take up within Bitcoin's blockchain.
Kileen further said that because of this improved functionality and efficiency, Bitcoin presents a mind-blowing potential.
There is an increasing number of programmers who are focused on building smart contracts within Bitcoin's blockchain, resulting in Bitcoin's utilization on the world of DeFi - decentralized finance. It is a term that describes various financial applications made to remove the middleman.
A recent Explica report mentioned that Bitcoin's latest upgrade would take effect in November.
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Written by Fran Sanders