The Bitcoin network uses digital signatures that allows it to sign and authorize transactions. The signatures ensure that coins can only be spent by the individuals that possess the corresponding private keys.
Bitcoin uses the algorithm known as ECDSA (Elliptic Curve Digital Signature Algorithm) which was chosen by Satoshi Nakamoto while designing. ECDSA algorithms generate signatures that are difficult to forge and easy to verify.
However, ECDSA lacks a key desirable property: there is no efficient way to compress and verify signatures together. A new signature scheme was proposed by Bitcoin Core contributor and former Blockstream CTO Gregory Maxwell to improve the scalability, efficiency, and privacy of Bitcoin. That new signature was Schnorr signatures.
Why A Bitcoin Taproot?
Schnorr signatures were to be introduced through a protocol update known as Taproot. Taproot is a softfork to the Bitcoin network that will improve its scripting capabilities and privacy. It would expand on Bitcoin’s smart contract flexibility by enabling something called MAST (Merkelized Abstract Syntax Tree), which will make it more difficult to trace and analyze Bitcoin transactions. It does so by making complex transactions—such as multi-signature transactions and Lightning Network transactions—indistinguishable from basic transactions.
The MAST would help make smart contracts more efficient and private by only revealing the relevant parts of the contract when spending. In essence, Taproot is a collection of many upgrades.
With the Taproot upgrade, developers will be able to create more extensive Bitcoin applications, while end-users will be able to benefit from cheaper, more private transactions. Bitcoin would also be able to compete with other improved blockchains like Ethereum that already have programmable smart contracts.
The Taproot activation was locked in for a November 2021 release, following its approval by bitcoin miners in June. The upgrade went live yesterday, November 14th, when the Bitcoin blockchain reached block 709,632 at 5:15 UTC time.
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