Like all systems in general, Bitcoin’s blockchain system also requires an upgrade to increase its effectiveness. After its last upgrade four years ago, in 2017, Bitcoin has finally made another upgrade as a major step in increasing the level of privacy security on its system known as Taproot. On the CNBC website, Alyse Killeen, founder, and managing partner of Bitcoin-focused Stillmark, explains that Taproot is playing an important role in reaching out to entrepreneurs in expanding the functionality of using Bitcoin. This update was made after obtaining approval from all Bitcoin miners in the world and took effect from November 2021. To get to know the taproot system better, let’s look at Tokenomy’s explanation after this!
What is Taproot Bitcoin?
Taproot is a system upgrade that aims to increase the privacy and efficiency of Bitcoin’s blockchain network. Therefore, one of the targets of this upgrade is the security system of digital signatures. In the blockchain system, digital signatures are very important as one of the user identification. In its implementation, it is considered as someone’s fingerprint that is recorded in all the transactions they make. Previously, the cryptocurrency system used the Elliptic Curve Digital Signature Algorithm which served as a personal key in wallet access to ensure valid user identification. When Taproot is fully functional, the digital signature system will change to Schnorr’s signature.
What is Schnorr’s signature? The Schnorr signature is a combination of existing public keys to create a new signature that serves to ease transactions. According to Poolin Alejandro De La Torre, Vice President of a Bitcoin mining company in Hong Kong, Schnorr’s signature will make multi-signature transactions untraceable thereby providing greater privacy. This is because the keywords used by users will not be exposed much in the transaction chain in the Bitcoin blockchain system. This could be the key to fixing the weakness of the Bitcoin network, which records all transactions publicly accessible, which results in poor user privacy.
In the process, Taproot will also provide space for smart contracts which are the main feature of the blockchain network that allows all transactions to be carried out without intermediaries. In addition, this upgrade also introduces the MAST (Merkelized Abstract Syntax Tree) which makes Bitcoin transactions more difficult to manipulate and track. In other words, this increased security will provide space for Bitcoin to start playing in the decentralized financial market (DeFi).
How does Bitcoin Taproot Works and what are the benefits?
In the implementation process, taproot will make recording transactions of all users in the Bitcoin blockchain network look like standard transactions even though there are more complex transactions happening behind the scenes. This is done by a combination of public keys and Schnorr signatures. As a result, less data is used to process transactions, so the cost of smart contracts is lower.
Taproot has good potential to expand the functionality of using Bitcoin. This is because the implementation of a smart contract system in the Bitcoin blockchain system will make it easier for users to carry out any transactions with their tokens. Starting from making rental payments, buying a product or service, to making transactions for payment for administrative matters such as registration of vehicle numbers.
The Effect of Taproot on Bitcoin Prices
The news that Taproot will be held in June 2021 has made the price of Bitcoin reach $ 40,000 USD. Although the price of Bitcoin has decreased, the existence of Taproot has the potential to make the price soar again in the future. This is because if this upgrade goes smoothly, the smart contract function in it will make the value of Bitcoin benefits increase. Thus, more and more will make Bitcoin a transaction tool in many industries and lead to an increase in market demand for this coin. In addition, increasing privacy in it will further increase the trust of its users. In short, if the implementation of Taproot goes well, the value of Bitcoin may reach a new record in history.
However, there are some people who are skeptical that the existence of Taproot will have a significant price increase impact on Bitcoin. Jason Deane, a quantum economic analyst, explained to CNBC that this upgrade provides a loophole for bugs to enter the Bitcoin blockchain system. If this happens, the user’s trust will be destroyed in the cryptosystem.
The worst possibility was what made the Taproot process tested repeatedly. Everything will be carefully checked before being rolled out to all its users. In the process, there were a number of investors who became skeptical about the possibility of developing the Bitcoin network to grow because the long pause made the market tired of waiting.
What do you think? Will Taproot have the potential to increase the price of Bitcoin? Are you more motivated to invest in this asset? If interested, then Tokenomy can be a platform that will give you a safe and reliable Bitcoin investment experience. Come on, start investing in Tokenomy!
