Taproot, the long-anticipated upgrade of Bitcoin, has been activated at block 709,632, giving developers the opportunity to add features that will boost privacy, scalability, and security on the network.
Over 90% of miners decided to "sign up" for the upgrade back in June. Since lock-in and activation were programmed to occur at different times, node operators and miners have had a chance to upgrade to the latest version of Bitcoin Core, 21.1, which contains the Taproot code merged with Bitcoin Core.
The new type of transaction can only be used once they have enforced the new rules.
The Taproot upgrade combines all of Bitcoin's technological innovations into one. Gregory Maxwell first proposed it in 2018.
A.J. Townes, Pieter Wuille, Tim Ruffing, and Jonas Nick wrote three Bitcoin Improvement Proposals (BIPs) that codified Taproot, which was merged into Bitcoin Core in October 2020.
Schnorr signatures are at the heart of the upgrade. Bitcoin has been using the cryptographic scheme ECDSA for "digital signatures" in which a user signs a transaction with their private key in order to approve it. Taproot switches to a new scheme called Schnorr.
With this new scheme, every Taproot transaction now uses digital signatures, adding new features designed to make Bitcoin transactions more secure, private, and large.
Various projects throughout the ecosystem will benefit from Taproot. Multi-signature transactions will, for example, be cheaper and use less data because more than one signer is required to sign the transaction.
Developers from around the world are working on Taproot, an effort to improve the privacy of Bitcoin, which has a very public transaction history.
Using a public block explorer such as Mempool space, curious users can view any Bitcoin transaction ever made.
Taproot supports this, but some of the more complex transactions (often referred to as "smart contracts") can be hidden. Taproot, for example, allows Lightning Network transactions to appear like any other transaction, further strengthening transaction privacy.
The limited transaction space of Bitcoin poses a huge problem for scalability. This is something Taproot should address as well. The developers cannot simply increase this limit without impairing Bitcoin's decentralization, so they are constantly trying to find ways to make better use of the currently available block space.
Throughout the Bitcoin network's 13 years of existence, numerous community-driven hard forks have been implemented. Lightning Network, meanwhile, continues to grow and reach new heights even as Taproot still has a long way to go.