In the past four years, Bitcoin hasn’t implemented any upgrade until now. The latest upgrade on the Bitcoin network is Taproot. The main aim of implementing Taproot is to streamline the transactions making them more efficient and cost-effective.
In this blog, we will give you a brief overview of Taproot and the effect it will have on Bitcoin transactions now and in the future.
Taproot Upgrade: What does it do?
You might already know that bitcoin transactions require signatures that need to be verified to complete the process. Some bitcoin transactions require a single signature whereas some need multiple signatures.
Verifying each signature takes a lot of time to process along with a lot of energy. This increases the costs and reduces the speed of processing transactions. However, the latest Taproot upgrade implements signature aggregation.
Signature aggregation in Taproot combines the transactions that need multiple signatures for verification. Moreover, the upgrade also combines multiple signatures and single signatures transactions. Since the signatures are combined and can’t be differentiated, it enhances the privacy of transactions.
Taproot Upgrade: How Does Signature Aggregation Works?
The latest Taproot upgrade uses Schnorr signatures in addition to the Bitcoin’s Elliptic Curve Digital Signature Algorithm (ECDSA). With this, users can not only generate private keys for verifying transactions, but they can also aggregate the multiple signatures saving a lot of time.
Linearity is one of the key concepts of Schnorr signatures. This allows the verification of Bitcoin transactions in batches rather than one transaction at a time.
Taproot Upgrade: What Are The Benefits of Implementation?
- As mentioned above, Taproot upgrade combines multiple transactions and signatures for easy and quick verification. This increases the number of bitcoin transactions that can be processed at a time thus reducing the overall costs.
- Taproot upgrade also processes the bitcoin transactions that have occurred at Layer 2 channels. This also makes the bitcoin network more efficient.
- The upgrade also enhances the overall privacy of bitcoin transactions. Since signatures are aggregated and can’t be differentiated, it is difficult to identify the participants of the transaction.
- The upgrade also greatly benefits the smart contracts feature of bitcoin. Earlier, the smart contract feature of the bitcoin network wasn’t used to its full potential due to the inability to scale transactions. However, with the taproot upgrade, this problem is solved. This also creates a possibility for Bitcoin to be used as Decentralized Finance (DeFi).
Taproot Upgrade: How Does It Affect Bitcoin As A Cryptocurrency?
Since taproot enhances the speed of transaction processing, it makes Bitcoin as a highly viable currency to be used in the future. Also, as a greater number of transactions are processed, bitcoin’s worth will increase consequently.
Also, if bitcoin reaches its maximum value of 21 million coins, taproot will generate more transaction fees due to faster transactions. This will be the bulk revenue for miners.
The latest Taproot implementation drastically changes the way bitcoin transactions are processed. And it will yield far better results for bitcoin and its users in the future.
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