Bitcoin has recently undergone a major upgrade, highlighting the blockchain’s ability to execute more complex transactions, increasing the virtual currency’s use cases and making it more competitive with Ethereum when it comes to processing smart contracts.
Smart contracts are self-executing transactions whose results are based on pre-programmed input.
The extension, called Taproot, is perhaps the most significant update to the Bitcoin protocol since 2017.
Taproot was formally activated on Sunday, November 14, on block 709,632. Blockchains carry out transactions in stacks or blocks that can only process a certain number of transactions.
Greater flexibility in terms of different types of transactions, as well as lower costs, will serve as catalysts for even greater development of DeFi (decentralized finance) and NFTs (non-fungible tokens) on Bitcoin, and could open the door to a wave of technological progress on the original crypto network.
The excitement surrounding Taproot’s activation led to a surge in Bitcoin’s valuation, which catapulted it to an all-time high of $69,000 on November 10.
The Taproot upgrade includes three separate upgrade proposals. Nevertheless, this upgrade also introduces a new digital signature scheme called “Schnorr,” which will provide more privacy and efficiency in Bitcoin transactions. Schnorr could also allow Bitcoin users to enter into more complex smart contracts.
Taproot improves privacy by disguising the nature of the transaction performed. Schnorr signatures are able to perform more complex transactions on the Bitcoin protocol, making wallets that require multiple signatures appear like any other transaction.
Bitcoin transactions also promise to be more data-efficient and affordable, optimizing block capacity, resulting in lower transaction fees.