Bitcoin’s first upgrade in four years went live last weekend and it is such a huge deal for Bitcoin advocates, enthusiasts and stakeholders as the upgrade means a number of things for them.
The upgrade follows Ethereum’s Altair upgrade which is about a month old. The Altair upgrade is aimed at making the network better, faster and more environmentally friendly. In the recent past cryptocurrencies, majorly Bitcoin, have been criticized for consuming huge amounts of electricity. Bitcoin suffered many challenges as a result of these criticisms. Tesla, for instance, stopped accepting Bitcoin as a means of payment for its electric vehicles as a result of the harmful effect Bitcoin’s mining process had on the environment, and promised to resume accepting the cryptocurrency once a safer means of mining it is introduced.
Bitcoin’s Taproot upgrade is very similar to Ethereum’s Altair upgrade. The Taproot upgrade is the game-changer that Bitcoin has been waiting for all along. The upgrade will power increased privacy for transactions as well as improved efficiency, and unlock Bitcoin’s potential for smart contracts which seeks to completely remove middlemen from the transaction scene. Cryptocurrencies were introduced as game-changers in the financial scene, and they’ve not stopped proving that. They ensure transactions are completed faster, safer and without the need of a middleman. But, they are still to unlock their full potentials, Bitcoin most especially. The Taproot upgrade is, therefore, the first step to unleashing Bitcoin’s full potentials.
Founder and Managing Partner of Bitcoin-based venture firm Stillmark, Alyse Killeen spoke about Bitcoin’s latest upgrade. Alyse Killeen known for working with some of the greatest minds in the crypto space, as an engaged investor, advisor, Board Director, mentor and mentee, said that “Taproot matters because it opens a breath of opportunity for entrepreneurs interested in expanding Bitcoin’s utility”.
The Taproot upgrade is a much better successor to the cryptocurrency’s last upgrade in 2017 called “Last Civil War” and has a lot of prospects. But what is changing?
The new Taproot upgrade has to do majorly with digital signatures. Currently, Bitcoin uses the “Elliptic Curve Digital Signature Algorithm,” which creates a signature from the private key that controls a Bitcoin wallet, and ensures that Bitcoin can only be spent by the rightful owner. According to experts, the Taproot upgrade will include “Schnorr signatures” which will make multi-signature transactions unable to be read. This way, users get more privacy for their transactions. Although the upgrade doesn’t mean that users’ Bitcoin addresses will become invisible, what it means is that simple transactions will become indistinguishable from those characterized by multiple signatures. According to Mining engineer Brandon Arvanaghi, “you can kind of hide who you are a little bit better, which is good”.
Bitcoin was designed to be anonymous in the first place, the Taproot upgrade is just a means to provide that Bitcoin remains so.
The Taproot upgrade is also a big win for smart contracts. Smart contracts, according to Wikipedia, are computer programs or a transaction protocol that is intended to automatically execute, control or document legally relevant events and actions, according to the terms of a contract or an agreement. The objectives of smart contracts are the reduction of need in trusted intermediators, arbitrations and enforcement costs, fraud losses, as well as the reduction of malicious and accidental exceptions, etc.
Smart contracts are existent and dependent on a blockchain. They can be used for any type of transaction. They are safe, efficient and can be completely trusted and can be used to complete any type of transaction. With the Taproot upgrade, smart contracts will transcend to a completely different level with increased functionality and efficiency.
Founder and Managing Partner of Bitcoin-based venture firm Stillmark, Alyse Killeen said that the Taproot upgrade will unlock “mind-blowing potentials” for smart contracts. Smart contracts are created either using Bitcoin’s core protocol layer or the Lightning Network which is a payment platform based on Bitcoin. While it is fast, efficient and cost-friendly, creating a smart contract on Bitcoin’s core protocol layer is quite expensive. “Lightning transactions can be fractions of a penny…while a Bitcoin transaction at the core protocol layer can be much more expensive than that”, she explained.
Ahead of the Taproot upgrade, developers had begun to build on Lightning. This will take the world of smart contracts to a new era. CEO of Marathon Digital Holdings, Fred Thiel, while emphasizing how important the Taproot upgrade and how such an upgrade is important for smart contracts is said that “It’s already the primary driver of innovation on the Ethereum network. Smart contracts essentially give you the opportunity to really build applications and businesses on the blockchain”.
What this means is that Bitcoin could become an important contender in the world of Decentralized Finance (abbreviated as DeFi), as more programs build smart contracts on its blockchain. For now, Ethereum remains the king of DeFi.
As of the time of writing this article, the world’s biggest cryptocurrency was trading at $65,992.