Bitcoin’s first update in four years – the Taproot update – went live on Sunday on block 709,632. The new update offers greater scalability, privacy, and efficiency.
It combines the Schnorr signature scheme with MAST (Merklized Alternative Script Tree) and leverages a new scripting language called Tapscript.
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Broadly speaking, there are three important parts to the update. First comes the signature – the elliptic curve digital signature algorithm has been replaced by the Schnorr signature scheme.
The new signature scheme is “much more sophisticated”, “lightweight” and “flexible,” Jonathon Miller, managing director of crypto exchange Kraken, told Forkast. News.
The Schnorr signature scheme makes smart contract transactions appear like any other Bitcoin transaction on the blockchain – you can't tell the difference between multi-signature smart contracts and peer-to-peer transactions from the record of the blockchain.
This means greater privacy, not for simple peer-to-peer transactions, but for complex transactions involving multiple signatures.
The second part of the update is the adoption of Tapscript – a new programming language. Tapscript is much more programmable than the previous language used to add Bitcoin transactions to the blockchain. This will increase smart contract functionality on the Bitcoin blockchain and allow for smoother updates in the future.
The third and most important part of the Taproot update brings significant improvements to the structure of Bitcoin transactions. The update reduces the smart contract data size, i.e. the amount of data needed to record smart contract transactions on the blockchain. This, in turn, reduces the cost of transactions and increases scalability.
