The upcoming Taproot activation stands to possibly make the Bitcoin (BTC) ecosystem more user-friendly and more secure. While most of the cryptocurrency enthusiasts throughout the world appear to be gushing about Ether (ETH) currently and how its forthcoming London hard fork stands to push the altcoin’s value even higher, reports have recently emerged that suggest BTC’s much-anticipated Taproot upgrade will go live before the end of this year.
In that context, most Bitcoin mining pools appear to already be signaling their support for this activation. According to the data that is available on Taproot.watch, a site that is designed by core Bitcoin developer Hampus Sjöberg, Taproot signaling at the moment accounts for around 56% of Bitcoin’s cumulative hashing power.
It should also be noted that two of the biggest bitcoin mining pools by hash rate, F2Pool, and AntPool, have been major proponents for this upgrade since its development started. Also, several other large mining operators like Slush Pool and Foundry USA have expressed their support for this activation.
What Is Taproot?
Taproot can be considered to be the latest step in Bitcoin’s evolutionary path since the upgrade aims to enhance the general usability of the network by making transactions faster, cheaper, and easier to deploy. It also aims to eventually support the deployment of smart contracts.
Moreover, Taproot proposes considerable privacy promises. It aims to make all transactions appear the same to all except the transacting parties. That potential camouflage-based framework appears as though it has been inspired by security-centric crypto offerings that are available in the current market. Hence, it might move Bitcoin closer to some privacy-focused coins, at least from a design point of view.
On this matter, the co-founder and managing partner at cryptocurrency lending platform Nexo, Antoni Trenchev, told reporters that the proposed Taproot update is proof of Bitcoin’s decentralized nature and that the network is always seeking to enhance and grow. He also thinks that the upgrade serves as a reminder to the investors that, unlike gold, BTC is a dynamic store of value in every sense, adding:
“All these admittedly major improvements pave the way for even wider Bitcoin adoption and continued price appreciation. In all, Taproot is one of BTC’s most anticipated updates since the block size upgrade of 2018.”
The chief operating officer of crypto exchange bitFlyer USA, Joel Edgerton, told reporters that although most in the cryptocurrency community appear to be focused on BTC’s price action currently, what they are overlooking is the issue that bitcoin’s underlying technology is what normally gives it its value, and Taproot is a critical development, for many reasons:
“Firstly, it reduces transaction data size, which could lower transaction fees for complex transactions. Additionally, it increases privacy on multisig and time-locking wallets by making it difficult to distinguish them from simple, single-sign wallets while also allowing for increased wallet functionality by allowing developers to use vaulting logic.”
According to Edgerton, Taproot shows the Bitcoin community’s maturity and how everyone appears to have learned various valuable lessons from the BTC upgrade wars of 2017, which is of utmost importance to plan and implement upgrades through the use of the decentralized, community-based vote.
In 2017, BTC underwent a hard-fork, which results in the creation of new crypto known as Bitcoin Cash (BCH). Even though the process was very straightforward, the period leading up to the hard fork was full of strife, with most core community members clashing with each other.
Theoretically, Taproot is an elegant engineering solution that has been devised using the proven crypto foundations that can help in offering various evolutionary enhancements to the Bitcoin protocol.
The CEO of blockchain software company Jelurida, Lior Yaffe, pointed out to reporters that by integrating Schnorr signatures and Merkelized Abstract Syntax Trees (MAST), Taproot can convert the representation of complex BTC transactions, like multi-signature transactions and the transactions used to set up a Lightning channel, to appear just like a regular BTC transaction when it gets submitted on-chain.
In the world of cryptography, a Schnorr signature is easily “provably fair” and it seems functionally superior to conventional logarithmic signatures. These are normally faced with intractability-related issues.
In the same context, MAST are unique digital offerings that support the deployment of different user-selected conditions that need to be fulfilled in order for an encumbered number of BTCs to be spent.
In general, this reduces storage and can even indirectly lower fees for these types of transactions. Moreover, in the long term, when its usage becomes widespread, Taproot may be able to considerably enhance privacy for Lightning and multi-signature users. Yaffe added:
“From an ecosystem perspective, I view Taproot as an all-in attempt by the Bitcoin devs and community to finally make the Lighting network a mainstream payment platform.”
How Will Taproot Affect Bitcoin?
Analysts and commentators say that the other aspect of the proposed upgrade worth considering is whether or not Taproot will have any considerable effect on Bitcoin’s future price action.
In this regard, Edgerton does not believe that the activation will have any sort of near-term impact on Bitcoin’s value. But he thinks that the ‘under the hood’ changes that will come due to this update will make the BTC network more functional and competitive.
Yaffe thinks that in the long term, enhancing Lightning network adoption which reduces transaction fees and settlement times will keep BTC and its entire ecosystem as a relevant internet era payment method, adding:
“Given that the recent surge in Bitcoin price can be attributed more to its potential use as a store of value and to adoption by institutional investors, I don’t expect Taproot to have any meaningful short-term price impact.”
Eventually, co-founder and chief operating officer of crypto exchange WazirX, Siddharth Menon, told reporters that since 2010, the latest Taproot upgrade has been much anticipated and might have a positive impact on the cryptocurrency.
“Slowly but steadily, this network gets better every day.”
Other Crucial Aspects Of Taproot
According to Bitcoin’s community consensus, the above-mentioned Taproot activation will only be given the green light to continue if 90% of all the mined blocks include an activation signal within a difficulty adjustment window (2,016 blocks).
Notably, the consensus agreement needs the consensus agreement has to happen during one of the difficulty epochs between now and August 11 to ensure that the network upgrade can go ahead as planned in November.
327 signaling blocks have already emerged in the current window as of May 7, 2021. The miners responsible for 610 blocks have decided not to include a “signal bit.” These ‘no’ votes issued by the miners currently account for about 30% of the 2,016 blocks in the current difficulty window.
Some of the pools that have already voted against the activation include big names like BTC.com, viaBTC, Poolin, Binance Pool, and HuobiBTC.