What Is Taproot Bitcoin? How Does It Affect Bitcoin?


24 June 2022

What is Taproot? It’s neither a carrot nor a radish, but rather a Bitcoin upgrade that promises to bury transaction information deep in the metaphorical soil. If you are searching for what is Taproot Bitcoin, this bePAY’s insight post is designed for you. All the in-depth information about Taproot is prepared for you, as well as its importance to Bitcoin.

Taproot, which launched in November 2021, was the most significant Bitcoin update since 2017. This update resulted in a hard fork, which divided the Bitcoin blockchain into two. Though Taproot wasn’t nearly as controversial, it’s important to comprehend how it impacted the largest blockchain network in the world.

What Is Taproot Bitcoin?

Taproot is a soft fork that enhances Bitcoin’s scripts in order to promote privacy, efficiency, and the network’s capacity to perform smart contracts. It is regarded as the most important Bitcoin improvement since SegWit in 2017.

The Taproot update is comprised of three independent Bitcoin Improvement Proposals (BIP), namely Taproot, Tapscript, and its core, the new Schnorr signature system. Taproot seeks to provide Bitcoin users with several advantages, including increased transaction privacy and decreased transaction costs.

It will also allow Bitcoin to conduct more sophisticated transactions and possibly expand its use cases to compete with Ethereum, particularly in terms of smart contract capabilities and network support for Decentralised Finance (DeFi) and non-fungible tokens (NFT).


What is Taproot Bitcoin?

The Taproot idea was revealed for the first time in January 2018 by Bitcoin Core developer Greg Maxwell. Taproot was added to the Bitcoin Core library in October 2020 following Pieter Wuille’s pull request. Node operators must embrace Taproot’s new consensus rules for the update to be completely implemented. It ultimately garnered approval from 90% of miners and was triggered on block 709,632 on November 14, 2021.

How Does Bitcoin Taproot Upgrade Work?

Upgrade Taproot implements three BIPs:

BIP340—Schnorr Signature

BIP340 – Schnorr signature technology provides a more secure, versatile, and compact form of cryptographic signature. It also enables multi-signature transactions (in which multiple parties endorse a single transaction) and smart contracts (in which predetermined conditions must be met to execute a transaction) to commit the same amount of data to the Bitcoin blockchain as a standard, single-signature transaction. 

With Schnorr Signatures, just a single aggregated public key and signature are saved, as opposed to the public keys and signatures of every participant. Observers are unable to distinguish if a transaction has single or numerous endorsers, resulting in a smaller blockchain load. 

Notably, Schnorr signatures are backward compatible with the Elliptic Curve Digital Signature Technique, the cryptographic algorithm Bitcoin has employed since its creation (ECDSA). This allows service providers like exchanges, custodians, and wallets to voluntarily upgrade over time.


Main upgrading of Tarproot


BIP341 – Taproot builds on the privacy improvements of the most recent Bitcoin upgrade, SegWit, and implements Merklized Alternative Script Trees (MAST), which allow only the executed conditions of a smart contract transaction to be committed to the blockchain, as opposed to the complete details of all other possible outcomes. 

Merkle trees are often used in cryptography to confirm the existence of data in a collection without revealing the complete set. By revealing just the facts of the conducted transaction, Taproot provides Bitcoin users with more privacy. Those auditing the blockchain would not be able to access unexecuted transaction conditions or outcomes, which may include sensitive private information such as the wallet type. 

Since unexecuted transaction information is no longer maintained on the blockchain, MAST should also enable improved scalability, transaction throughput, and efficiency.

>> Would you like to learn more about SegWit?


BIP342 – Tapscript modifies the Script programming language used to compose Bitcoin transaction parameters to accept Schnorr Signatures and Taproot technology for those who opt-in to the upgrade. Tapscript will also make it simpler to develop future Bitcoin improvements by easing the introduction of new kinds of opcodes (transaction instructions).

What Are Bitcoin Taproot Upgrade Advantages?

As we’ve previously stated, Taproot offered significant privacy enhancements to Bitcoin and expanded its use cases? Other potential benefits include:

  • Improving network scalability by lowering the quantity of data that must be sent and stored on the blockchain;  
  • Increasing the number of transactions per block (TPS rate);
  • Reducing transaction fees.


The benefit of Taproot

A further advantage of Taproot is that signatures will no longer be susceptible to forgery, a recognised security problem on the Bitcoin network. Signature malleability indicates that it is theoretically feasible to modify a transaction’s signature before it is verified.

In this manner, the assault would make it look as if the transaction never occurred. This puts Bitcoin vulnerable to the dreaded double-spending issue, which may compromise the distributed ledger’s integrity.

The Importance Of Bitcoin Taproot Upgrade

Taproot is likely the most significant Bitcoin protocol improvement to date. Among other things, we have learned that Taproot enhances Bitcoin’s anonymity. But why is this essential? The Bitcoin network is pseudonymous, which means that network users are not required to identify themselves in order to engage with the network. 

Nonetheless, each network transaction is recorded on Bitcoin’s public ledger and is thus immediately traceable. The network is thus not anonymous. Once the individual associated with a Bitcoin wallet address has been identified, any transactions conducted with this wallet may be attributed to the corresponding individual.

In addition, prior to Taproot, certain sorts of transactions, particularly smart-contract transactions like as multi-sigs, were immediately distinguishable from “basic” transactions. Therefore, a blockchain-analysis company like Chainalysis, which has superior monitoring technology at its disposal, could theoretically not only identify the person behind a wallet but also determine the kind of transactions the individual conducted.


Bitcoin Taproot upgrade importance

It is mostly up to the owner of a wallet address to keep it anonymous. However, the Taproot code patch was required to render the various transaction types undetectable on the blockchain. Taproot allows a variety of smart-contract transactions to look like “simple” transactions on the blockchain.

By concealing the real nature of a transaction, Taproot enables smart-contract transactions to masquerade as normal transactions among the vast majority of simple transactions. This enhances the network’s privacy.

Meaning For Bitcoin Network?

As stated before, the Taproot update improves transaction processing, making it simpler and quicker to complete transactions on Bitcoin’s network. It also improves the number of transactions that can be handled and reduces the total cost of transactions on the network as a result of the increased size of transactions.

One may argue that Layer 2 technologies, such as the Lightning Network, are meant to achieve the same goal. However, after a channel has been closed, Layer 2 transactions must still be validated on the Bitcoin network. 10 These groups of unconfirmed transactions might clog Bitcoin’s network when sent for confirmation. Implementation of the Taproot update might increase the efficiency with which Bitcoin’s network processes these transactions.


What are Taproot upgrades mean to Bitcoin?

Moreover, the deployment of Taproot on the Bitcoin blockchain is a victory for smart contracts. It might facilitate the development of more creative financial apps on the Bitcoin network. According to others, the Taproot update also suggests Bitcoin might enter the Decentralized Finance (DeFi).

Despite the fact that the cryptocurrency’s blockchain has always had the capacity to execute smart contracts, its full potential has never been realised owing to scalability issues. The Taproot implementation addresses this issue.

>> For more information about Layer-2, read this post.

FAQs About Bitcoin Taproot Upgrade

Which Will Cryptocurrency Taproot Benefit?

Taproot is a Bitcoin update that offers various new features. Taproot incorporated the Schnorr digital signature algorithm into Bitcoin, enhancing the underlying cryptography of Bitcoin. Taproot used SegWit to enhance Bitcoin’s privacy and reduce transaction costs.

Who Created The Taproot Bitcoin?

Nick, together with A.J. Towns, Tim Ruffing, and Pieter Wuille, is credited for drafting the three Bitcoin Improvement Proposals (BIPs) that comprise Taproot, the most major Bitcoin update in the last four years.

How Does Taproot Function?

Using Taproot, all parties involved in a transaction may collaborate to make complicated transactions seem to be regular person-to-person exchanges. They would do this by merging their public keys to generate a new public key and their signatures to generate a new signature.


The Bitcoin Taproot frequently asked questions

Closing Thoughts 

Taproot is an eagerly awaited and well-endorsed Bitcoin update. When combined with Schnorr signatures, considerable enhancements are seen in terms of privacy, scalability, security, and more. These enhancements may help increase interest in the Lightning Network and promote multi-signature as an industry standard.

Regardless of your participation in the Bitcoin community, the additional advantages of enhanced privacy, efficiency, and security are likely to affect your Bitcoin use.