Bitcoin soft fork days away as Taproot upgrade closes in
Real-world use cases are one of the main adoption drivers for every crypto ecosystem, which also holds true for the Bitcoin (BTC) network. In the next seven days, the Bitcoin protocol will undergo a soft fork in the name of Taproot upgrade, which aims to improve the network’s privacy, efficiency and smart contracts capability.
Taproot is Bitcoin’s first major upgrade since August 2017, which saw the introduction of Segregated Witness (SegWit) and resulted in the launch of Lightning Network. While the previous fork primarily sought to fix transaction malleability and improve Bitcoin’s network scalability, the Taproot upgrade aims to revamp transaction efficiency, privacy and support smart contracts initiatives.
The Taproot upgrade was set for deployment after achieving a 90% consensus among the Bitcoin miners (mining nodes). On the same day in June 2021, Bitcoin developer Hampus Sjöberg tweeted the announcement:
— Hampus Sjöberg ⚡ (@hampus_s) June 12, 2021
The Taproot soft fork will see the introduction of Merkelized Abstract Syntax Tree (MAST), which introduces a condition that allows the sender and receiver to sign off on a settlement transaction together.
In addition, Taproot will also implement Schnorr Signature, an algorithm that will allow users to aggregate multiple signatures into one for a single transaction, reducing the inherent visible difference between regular and multisig transactions.
Schnorr’s signature scheme can also be used to modify the user’s private and public keys, in a manner that can be verifiable to confirm the legitimacy of each transaction. According to the original Taproot proposal from January 2018 put forth by Gregory Maxwell:
“I believe this construction will allow the largest possible anonymity set for fixed party smart contracts by making them look like the simplest possible payments. It accomplishes this without any overhead in the common case, invoking any sketchy or impractical techniques, requiring extra rounds of interaction between contract participants, and without requiring the durable storage of other data.”
At the time of writing, Taproot.Watch, a website built by Sjöberg, shows that the Taproot upgrade will be activated on Nov. 14th after the successfully minting 1020 blocks.
Just last month, the Bitcoin network’s daily settlement value hit an all-time high after settling $31 billion worth of on-chain transactions.
Compared to the beginning of 2020, the network’s daily settlement volume has seen an increase of 40 times, supported by Bitcoin’s mainstream adoption in El Salvador and other jurisdictions.
There was $31 billion of value settled on the bitcoin network in a single day last week.
This is an all-time high for a single day of settlement value.
— Pomp (@APompliano) October 10, 2021
“[The Bitcoin network is] presently doing ~$190k per second. Compare this to $130k per second by Visa for US customers and $55k per second for Mastercard,” according to On-chain analyst Willy Woo.