While most people are interested in the Bitcoin price and other events in the space, the fundamentals and underlying network upgrades are often pushed to the side. However, the technical aspects and the developers’ hard work is what creates the entire network.
A combination of two upgrades, referred to as the Schnorr/TapRoot upgrade, has the potential to reduce transaction costs by up to 75%, while simultaneously increasing the security and privacy of the network.
TapRoot and Schnorr are signatures that improve the scalability and privacy of the Bitcoin blockchain. They can be implemented as a soft fork without requiring broad consensus.
This is very, very significant. A hard fork would result in no backward compatibility. As these hard forks continue, the network would fragment over and over. Hard forks are no longer viable with BTC, as it is simply impossible to get millions of people to agree by a particular deadline.
The Schnorr signatures will increase privacy and scalability. It means that multiple signers can sign with only one key, instead of two. It also means that multi-sig and single-sig keys are indistinguishable.
Schnorr further introduces quicker batch validation, meaning that many signatures can be verified at a faster pace than before. TapRoot will result in smaller transaction sizes, which will make the architecture easier to scale. TapRoot also hides partially executed code which will help assist in improving privacy. TapRoot and Schnorr obfuscate the code, make the sizes smaller, and allow multiple signers to sign with one key.
The soft fork is expected to go live in May, shortly after the Bitcoin halving. This should result in a Bitcoin price increase, though mainly due to the halving. Network upgrades are not factored into the Bitcoin price, only political news events and speculative gambles. Hopefully, this will change from 2020 onwards.
The upgrade has been warmly received within the community, though speculators and most others are concerned only about the Bitcoin price. One Redditor commented that:
“Taproot offers a new degree of privacy by making all transactions – no matter how complicated – appear the same to observers of blockchain data. The code adds what supporters call a much-needed feature to the network, and brings with it significant implications for scaling, fungibility and script innovation.”
There are many additional benefits to these upgrades. By making the code private and more secure, it also means that commercial and government agencies cannot track the technology and put people in jail for investing in an asset that is outside the authority of nation-states. Because Bitcoin is open source and does not have to answer to these authorities, it can upgrade its protocols however it wants to.
Instead of forcing individuals and small businesses to comply with government regulations, governments will have to keep up with innovations in the Bitcoin network which is getting stronger and stronger with each passing year.