(Last Updated on August 4, 2021)
Luckily for most of us idiots we don’t need to do anything in regards to Taproot and our stack of satoshis.
Maybe update some software or test out some new apps at your own risk!
No changes or steps required for 99% of retail investor Bitcoin users and how they use the network.
The average user will not notice much unless using a new software update that utilizes a Taproot protocol such as Schnorr signature aggregation or smart contracts.
So why are we stoked for Taproot?
+ Can improve speeds and reduce fees with Schnorr outputs
+ More efficient multi-signature process for those who want it
+ Enhanced privacy with P2TR outputs and Op codes
+ Smart contract capabilities
If you aren’t changing your multi-sig setup or adopting Taproot for your business/app/crypto software – then you won’t need to change anything.
At first network improvements from Taproot implementation will be minor as initial hurdles in setting up/updating/running Taproot are overcome. Lightning network will be streamlined further by batched Schnorr signatures and reduce network congestion in meaningful amounts over the layer 2 sidechain.
Expect industry altering software improvements in the ‘smart contract’ realm by early 2022.
The average user doesn’t have to utilize the new protocol upgrades included in Taproot at all.
All of the legacy software or hardware you are currently using will work fine on the network – you just may have some added optionality once Taproot is implemented.
If the protocol is adopted quickly and widely it will help reduce congestion on the network through P2TR smaller transaction size and streamlined multi-sig aggregation/validation.
If the smart contract layer 2 platforms are well developed – we may see a “Bitcoin DeFi” ecosystem explode.
Taproot is a technical upgrade to the Bitcoin blockchain and includes three Bitcoin Improvement Proposals or “BIPS”
=> BIP 340 – Schnorr signature scripts for generating, encoding, and validation
=> BIP 341 – Schnorr key aggregation including MAST and Merkle tree scripts
=> BIP 342 – Tapscript adds and updates “OP Codes” for increased optionality for verifying spends, signatures, and future smart contract blocks
As of the writing of this post it is about 90%+ confirmed through mining node consensus and we are looking at an upgrade date around mid-November 2021. The Taproot upgrade includes multiple components that focus on improving privacy/security and incorporating smart contracts on-chain. The largest protocol update to the BTC network since Segwit will include the full software implementation of 3 Bitcoin Improvement Proposals.
But similar to the Segwit protocol, it’s not all that exciting for the majority retail Bitcoin participants do not even run their own node, let alone use multi-sig or hardware wallets. They should be excited about improved privacy aspects and reduction of congestion across the peer to peer network of nodes that run the decentralized network.
Time will tell how many developers and participants across the Bitcoin ecosystem will embrace the Taproot features and start utilizing them routinely. Segwit has been useful to many wallets and exchanges but the adoption has been very slow and many of the exchanges took months, if not years, to start fully implementing Segwit wallets and transaction types.
Be careful of any scams during this time trying to lure you into malware as “updates for Taproot”.
Only download updates from official and trusted sources!
Is there anything the average wallet user has to do?
Nodes, exchanges, wallets, software developers, and mobile apps can choose to implement and run Taproot protocols for a variety of reasons which may include you needing to upgrade your software and run updates for your hardware wallet.
You can continue using the same software, apps, and hardware wallets you have been. Realize that some on-chain improvements may improve your transaction speeds and validation times just most likely you’ll need to engage on a new platform for smart contracts and/or utilize updates within your current app stack.
Summary of improvements:
-> Pay-to-Taproot (P2TR) helps create complex smart contract scripts onchain for Bitcoin
-> P2TR transactions store a Bitcoin public key directly instead of the public key hash reducing size and increasing speed
-> Schnorr Key Aggregation for multi-sig batching, signing, and validation which will enhance speed and efficiency
-> MAST batching for blocks and synchronized transaction of Merkle tree data blocks
-> Tapscript adds new functionality for future smart contracts, verification and validation methods
Pay-to-Taproot or P2TR Transactions
Allows spending of Bitcoin through unlocking merkle root or public key through a variety of scripts. This new “script language” introduction will allow stronger and more complex smart contracts to be built on the Bitcoin blockchain. This is a massive upgrade for the worlds only genuine decentralized blockchain and will add multiple layer 2 solutions.
This may quickly evolve into a Bitcoin DeFi ecosystem where yield farming through lending and borrowing protocols or alternative earning methods are the norm.
Privacy upgrade -> adding more layers of sophistication to wallet and transaction validations utilizing Bitcoin’s elliptic curve cryptography through key aggregation.
Increased efficiency for multi-sig transactions-> With Schnorr signatures it is much more efficient to batch or group multi-sig, trustless, signatures in one transaction. This lowers the volume of signatures/validations needed from network nodes to complete which in turn improves speed and reduces fees.
MAST or Merkelized Alternative Script Tree
Smart contracts -> The implementation of ‘locked’ contracts with multiple, possible output spending scripts onto a Bitcoin address.
Smart contracts, similar to the DeFi ecosystem of ETH, have been utilized to execute business agreements for labor and services, setup lending and borrowing platforms, early stage investments, research groups, and all sorts of other decentralized and trustless financial needs. Bringing this level of versatility in highly flexible ‘locked’ contracts on the Bitcoin blockchain will help define the future of finance.
In this case the “merkle tree” is the summarized groups of data inside one block. When Bitcoin is sent to a MAST address the coins are locked into the block that may include many spending scripts. The spender then unlocks the contract by providing one of the scripts and validating authenticity which then releases the coins.
The most notable improvement is in the ability to batch multiple spending scripts in locked, trustless transactions while allowing just a single key to validate the transactions and spend the Bitcoin once ready.
Tapscript adds new OP Code functionality
Bitcoin will have more malleability and customization for users who want to employ the new OP codes that come through the Taproot upgrade. These operation code sets will enhance the users ability for privacy and security by verifying P2TR outputs and Schnorr signatures.
It will be interesting to see what kind of companies are born out of the new possibilities of the Taproot functionality.