Since its launch in November 2021, Bitcoin has seen some of the most significant network updates. The update, known as Taproot, improved transaction processing efficiency and reduced costs. Below, we explore more details on the Taproot upgrade and what it means for the Bitcoin Network.
What Were the Effects of the Taproot Upgrade?
In a nutshell, the Taproot update combined multiple signatures and transactions together. On the Bitcoin network, digital signatures are necessary for transaction verification. Public keys are used for validation once they are generated using private keys.
Before Taproot became operational, every digital signature on the network had to be verified against a public key, which made transaction verification on the network slow. Complex multi-sig transactions requiring several inputs and signatures take longer to complete with this technique.
The Taproot implementation made it possible to aggregate signatures. This meant that several signatures could be verified all at once. The improvement reduced transactions with several inputs, including those from various addresses on the Bitcoin network, into a single one, which was especially advantageous for multi-sig transactions—or transactions that need signoffs from multiple parties.
Additionally, single-sig and multi-sig transactions were integrated into a single verification procedure by the Taproot update. Because it became more challenging to distinguish between transactions using single and multiple signatures, the update also had privacy consequences. As a result, it became more challenging to identify the parties involved in a transaction on the public blockchain of Bitcoin.
How Did the Taproot Implementation Impact Bitcoin’s Network?
Transaction confirmation on the Bitcoin network is now quicker and easier due to the Taproot update, which optimized transaction processing. In addition, because the size of transactions increased, it also increased the number of transactions that could be handled and reduced the total cost of transactions on the network.
Because it became more difficult to identify participants in a transaction on the public blockchain of Bitcoin, the Taproot update was also beneficial for privacy. The way it did this was by passing off multi-signature transactions as single-signature ones.
Taproot’s implementation was also another success for smart contracts on the blockchain of Bitcoin. It allowed for the development of more creative financial apps on the network.
What Impact Did the Taproot Implementation Have on Bitcoin as a Cryptocurrency?
It is likely that Bitcoin will become a more efficient means of transacting as it grows in size and transaction processing speed. Bitcoin’s usefulness has historically determined how valuable it is as a store of value. It is potentially possible that as more useful transactions take place on the Bitcoin network, the value of the cryptocurrency will rise as well.
Takeaways
The Bitcoin network is now far more private and efficient because of the Taproot upgrade. Taproot presents Bitcoin as a more valuable and effective cryptocurrency for the future with its enhanced privacy features, simplified transaction processing, and expanded capacity for smart contracts.
