The Bitcoin Taproot Upgrade
Bitcoin protocol upgrades
The Bitcoin blockchain is now preparing for the Taproot Upgrade, building on 2017's SegWit (Segregated Witness) Upgrade.
Bitcoin, which was kickstarted in 2008 with Satoshi Nakamoto’s whitepaper, enables users to transfer value thanks to a protocol that can approve transactions without the need of a central authority or third party. Nakamoto developed a solution to the “Byzantine Generals Problem” to tackle the problem of trust in payment transactions. This issue is resolved thanks to the Bitcoin core protocol. The decentralised Bitcoin network can also be altered and developed, provided the majority of stakeholders agree.
Upgrades to the Bitcoin protocol are usually pitched by software developers as recommendations called Bitcoin Improvement Proposals (BIPs). The BIP process go as follows: contributors first suggest, then discuss, develop, test, and review their idea for the protocol. This process aims to ensure that only necessary changes are made and that improvements are implemented cooperatively and with a strong consensus.
The Taproot changes were first introduced in January 2018 by Greg Maxwell of the Bitcoin Core developer team. The proposal was then added to the code library by developer Pieter Wuille in October 2020. Before the upgrade can come into effect on the blockchain, Bitcoin miners must update their software and accept the Taproot rules.
The SegWit Upgrade made it so the signature dumps of transactions for Bitcoin transfers are separated, allowing more transactions to be included in one Bitcoin block. Because the SegWit Upgrade did not change or disrupt the basic functions of the Bitcoin network, it’s classed as a soft fork.
For the Taproot Upgrade to be successful, at least 90% of Bitcoin miners need to approve it. The three-month approval process, called the Quick Trial, began on 1 May 2021. At the end of the three-month period, provided the approval threshold is met, the Taproot protocol will be operational on the Bitcoin blockchain from November 2021.
What will change in the Taproot Upgrade?
The Taproot Upgrade will improve scalability, privacy, and security on the Bitcoin blockchain. This upgrade will see the Schnorr multi-signature method added to the protocol alongside Bitcoin’s current signing method. With this change, multiple signing transactions can be combined.
The Schnorr signature method was developed by German mathematician and cryptographer Claus Schnorr and is considerably simpler than Bitcoin’s existing mechanism. With Taproot’s new multi-signature option, users will have the option to hide their identities when making Bitcoin transfers.
Like the SegWit Upgrade before it, Taproot will reduce data traffic on the Bitcoin network, increasing the number of transactions that can be added to blocks. This will have a knock-on effect of transaction fee reductions.
Currently, up to seven transactions can be verified in a single second on the Bitcoin blockchain. Since the number of transactions that can be included in blocks will increase with the upgrade, the number of transactions that receive approval within 10 minutes on the Bitcoin blockchain will increase too.
