Taproot is the latest proposed upgrade to Bitcoin since the Segregated Witness (SegWit) upgrade that was activated in 2017. SegWit was a relatively controversial upgrade, but Taproot is more widely accepted by the Bitcoin community.
Unlike a centralized network that can be changed unilaterally, a decentralized network like Bitcoin requires years of coordination from Bitcoin miners to deploy substantial changes to its code. Upgrades to Bitcoin must reach a 90% consensus from miners within a specified time period.
At the time of writing, the consensus for Taproot was met on June 12 and the upgrade is locked-in for activation on block 709,632 (mid-November 2021), and the new rules defined by a series of Bitcoin Improvement Proposals (BIPs) will be activated and enforced.
So what problem does Taproot solve?
Taproot aims to make transactions more private by aggregating participating signatures in multi-signature transactions. Currently, each of the signatures of a multi-signature transaction need to be verified. A technical solution known as Schnorr Signatures will be generated for each transaction.
Reducing the payload that is included in a blockchain transaction and reducing the number of signatures needed to be verified will inherently make mining more efficient and also reduce transaction costs.
Taproot adds new rules to Bitcoin, it does not modify or remove them. Because of this, Taproot will be an opt-in upgrade. Older Bitcoin nodes will all remain compatible and existing bitcoins in circulation will not be affected by this upgrade.
Once activated in November 2021, Taproot will improve transaction privacy and efficiency by aggregating signatures and reducing the number of verifications needed to complete a transaction. This will reduce transaction costs since less payload data is being added to the blockchain and transactions will be verified much quicker.
The Troika IO team will be carefully monitoring the Bitcoin Taproot upgrade and report any changes to the team.