What exactly is the much-anticipated Bitcoin Taproot, and how will it change Bitcoin forever?

For the traditional Bitcoin protocol, user data privacy and security are of utmost importance. The Taproot upgrade will make the Bitcoin network more reliable, secure, and efficient. The proposed Taproot upgrade has received more than 90% block support, which means that the soft fork activation of this upgrade will be realized in a few months.

But why are we excited and looking forward to this upgrade news, and what exactly is Taproot?

What is Taproot?

Taprootactivation.com explains as follows:

Taproot is a proposed Bitcoin protocol upgrade that can be deployed as a forward-compatible soft fork. By combining the Schnorr signature scheme with MAST (Merklized Alternative Script Trees) and a new scripting language called Tapscript, Taproot will expand Bitcoin's smart contract flexibility while providing more privacy by letting users mask complex smart contracts as regular Bitcoin transactions.

So it is a technical upgrade to the existing Bitcoin blockchain that can:

• Enhance user data privacy

• Secure transactions

• Scaling Bitcoin to have higher throughput to handle large transactions

Taproot Target and Schnorr Signatures:

The main goal of Taproot is to change the way scripts work in Bitcoin to improve the privacy, scalability, and security of the blockchain. It intends to achieve the same goal by providing a scheme called Schnorr signatures for Bitcoin.

What are Schnorr Signatures?

The Schnorr signature algorithm was originally proposed by German cryptographer Claus Schnorr in 2008. Schnorr uses multiple types of keys in complex Bitcoin transactions and generates a single signature, which is regarded as one of the advanced signature schemes by the cryptographic developer community. It uses advanced mathematical principles to provide string security and precision, is not affected by transaction malleability and has a relatively fast verification speed.

Note: Transaction malleability means that a Bitcoin payment transaction can be modified (or more accurately, forged and copied) after it is issued but before it is confirmed.

How do Schnorr signatures work?

Schnorr uses linear math to support the aggregation of multiple signatures for a single transaction, and the same logic applies to multi-signature transactions. Combining public keys and signatures into "threshold public keys" and "threshold signatures" can make multi-signature transactions indistinguishable from any regular transaction.

Schnorr signatures are primarily known for their simplicity and efficiency in generating short signatures. In addition to Schnorr signatures, the Taproot upgrade also utilizes MAST: Merklized Alternative Script Tree.

What is MAST?

MAST stands for Merklized Alternative Script Tree, which is a proposed solution using the Merklized tree, a classic data structure algorithm invented by cryptographer Ralph Merkle.

To understand the utility of MAST, we need to dig deeper into existing Bitcoin operations and understand P2SH (Pay to script hash).

P2SH script:

Essentially all bitcoins are “locked” in a script, which is a piece of software with a few lines of code that is embedded in transactions on the Bitcoin blockchain.

This script defines how the tokens can be spent in the next transaction. The spending conditions usually involve providing a signature to prove ownership of the tokens. Different conditions can be mixed and matched to create complex types of smart contracts. Starting in 2012, the scripts of tokens considered for spending are no longer publicly visible at the outset, and only the new owner of the tokens knows how to use them.

Pay to script hash: P2SH works its magic here, initially only the hash of the script is included in the blockchain, this seemingly randomly scrambled number holds the tokens. When the owner spends the tokens, it reveals the entire script as well as the "solution" to the script, and anyone can then use the initial hash to check if the provided script is indeed the original script that locked the tokens, and can immediately conclude that the script requirements are met.

But the P2SH script mechanism has some disadvantages, what are they?

In P2SH, the user who spends the token still needs to reveal all the conditions that may be met and the conditions that cannot be met. The problem with this mechanism is:

• First, make the operation quote data dense, as there may be multiple conditions that need to be identified and parsed

• Secondly, it hinders data privacy. Since users are required to disclose all the conditions under which tokens can be spent, everyone in the network can know the conditions and even identify which wallet is used, and even more, which will bring serious privacy consequences.

MAST is our hero, and it overcomes the limitations of P2SH. Unlike P2SH, it works by hashing all possible conditions for spending funds individually instead of combining them into a single hash column, and then adding these individual hashes to a Merklized tree, ultimately generating a single hash: called the Merklized root, this Merklized root “locks” the coins.

The Taproot upgrade utilizes Schnorr signatures to further hide MAST to the point where people will never know the MAST structure exists.

Now that we understand the two core technical changes included with the planned Taproot activation, it’s time to understand how these changes will further enhance Bitcoin and help it improve.

How will Taproot benefit the Bitcoin network?

We started out by discussing how Taproot can enhance the way Bitcoin transactions work.

As mentioned before, current Bitcoin transactions without Taproot use a series of complex features such as timelocks or multi-signatures. These transactions are publicly visible to everyone, but once Taproot activation is successfully passed (expected to happen by the end of 2021), things will change in a bigger way.

• Enhanced Privacy: Taproot consolidates all transactions and multiple spending conditions into a single level of enhanced Bitcoin privacy

• Less data to process: Less data will be involved in transactions, making the network more efficient

• Higher throughput: It will support more transactions per block, thus increasing the overall TPS

• Lower Gas Fees: Since transactions are more efficient and less data needs to be processed, this will significantly reduce Gas Fees

• Malleability Mitigation: Taproot will ensure that signatures are no longer malleable, which is a greater security threat in the Bitcoin network

Bitcoin's Taproot Road:

Bitcoin is currently experiencing a lot of painful corrections in the market due to sell-offs triggered by multiple concerns, mainly triggered by the futures market and ESG issues. Throughout May and the current week of June 2021, Bitcoin is still looking for direction in the turbulence, and many experts believe that the adjustment will last for weeks or months.

El Salvador’s adoption of Bitcoin as legal tender has given great hope to the Bitcoin community and further reinforced the belief that it is a true store of value and the most reliable inflation hedge for fiat currencies. Now, the Taproot upgrade is expected to alleviate some of the issues around security, scalability, and performance, another important trigger that could open the way for a long-term recovery. We still need to be patient.

But I do feel strongly that:

Bitcoin is not only a cryptocurrency, but also a hope, a real financial freedom for ordinary people who are deprived of the most basic right of self-sufficiency and happiness. The world has been divided between the rich and the poor for a long time, and now this decentralized crypto world has given us a new platform where it treats everyone democratically without any discrimination.

Bitcoin is here to stay and will transcend all barriers to change the world for the better for everyone.