The upgraded version of Bitcoin is here finally, after four years – ‘Taproot’.
It has just been approved by miners around the world. Crypto experts said it’s a pretty big deal for the world’s most popular cryptocurrency.
The Taproot or the newest upgrade is due to take effect in November. This will create better transaction privacy and efficiency.
But more importantly, it will unlock the potential for smart contracts. The main feature of its blockchain technology which removes middlemen from all types of transactions.
“Taproot matters, because it opens a breadth of opportunity for entrepreneurs interested in expanding bitcoin’s utility,” said Alyse Killeen, founder and managing partner of bitcoin-focused venture firm Stillmark.
The 2017 upgrade of Bitcoin is referred to as the “Last Civil War”, because of the prickly conceptual split separating the enthusiasts.
Unlike this one – Taproot has nearly worldwide support, in part because these changes are fairly incremental advances to the code.
What’s changing
The sudden makeover of Bitcoin after 4 years is related to digital signatures.
Digital signatures are the kind of fingerprints an individual leaves on every transaction they make.
Currently, the cryptocurrency is using the “Elliptic Curve Digital Signature Algorithm.” Taproot on the other hand will switch over to something known as Schnorr signatures.
This will make multi-signature transactions unreadable according to the experts.
It will also ensure more privacy as your keys won’t have as much exposure on the chain. Further, it will make simple transactions hazy from those that are more complex and contains multiple signatures.
Taproot makes smart contracts cheaper and smaller, in terms of the space they take up on the blockchain.
These smart contracts can be created both on bitcoin’s core protocol layer and on the Lightning Network. If executed on the Lightning Network it leads to faster and less costly transactions.
Developers have already begun to build on Lightning, in hope of the upgrade, which will allow for highly specific contracts.
Why the wait
The upgrade will probably take place in November. So, there will be a lot of testing time which would reduce the possibility of something going wrong during an upgrade.
“Upgrades allow the – extremely remote – possibility of a bug entering the system, which would destroy confidence in the whole cryptocurrency system, effectively wiping it out – a ‘self-inflicted wound’ if you like,” said Jason Deane, an analyst at Quantum Economics.
According to Deane the upgrade processes are so carefully rested and tested again to again before being deployed.
Remember the disastrous migration of 2013? It was a time when an upgrade went wrong causing the bitcoin to temporarily splitting in half.
“You don’t want different clients or miners in the protocol out of sync. That’s how catastrophic stuff happens,” Nic Carter, founding partner at Castle Island Ventures, told CNBC. “Because we don’t want a repeat of 2013, we have these extremely long lead times.”
