It will take some time to measure changes, but the process is underway. On November 14, Bitcoin opened to its most important update since 2017. The Blockchain behind the world’s first cryptocurrency is also the subject of “hard fork” and “soft fork” updates. Although less popular than Ethereum’s currently, they are still very important.
On decentralized finance (DeFi) and “smart contracts”, the update called “Taproot” will be very relevant elsewhere. In terms of speculation, too, all eyes are on the digital token. In 2017, during the last “SegWit” update, Bitcoin had gone from 4,000 to over $ 20,000 in four months. Currently, the cryptocurrency is up 2.03% to $ 65,435 (price at 10:10 a.m. KST) from its all-time highs.
Bitcoin: what changes explained simply
1 / Smart contracts
Bitcoin is not a benchmark for smart contracts. Its cryptocurrency has never been in the spotlight for its place in the Challenge, almost non-existent and left to Ethereum. With Taproot, Bitcoin is improving on this side of cryptography. The digital agreements which are stored on the Blockchain and which are at the heart of any decentralized finance project (including NFT) will be easier and more numerous to be registered on the Bitcoin blockchain thanks to changes made with the Schnorr signatures.
This new writing for contract signatures will make it possible to make “room” in transactions (up to 75% more efficient with the space they take up with a validation of their authenticity 2.5 times faster). The old signatures called ECDSA (Elliptic curve digital signature algorithm) severely hampered Bitcoin’s ability to handle more transactions. “The ECDSA method, by its rigid structure, is not ideal for more innovative transaction constructions than the integration of smart contracts on Bitcoin”, explained a journalist from Cryptonews.
Why not have included the Schnoor signature process from the start? The answer is very simple and concerns a patent. Claus-Peter Schnorr, who invented the code behind these more optimized signatures, had filed a patent to protect it. The latter expired in 2008 and Satoshi Nakamoto, the mystery creator of Bitcoin, did not want to wait to launch his Blockchain and therefore preferred to integrate the ECDSA process.
2 / Confidentiality
The arrival of these Schnoor signatures does not imply that it is easier to create smart contracts on the Bitcoin Blockchain. Now the multiple signature transactions will no longer be so easily distinguished from single signature transactions, which will make them much more confidential. It will be all the more difficult to know who is responsible for a transaction and many are worried that the authorities do not point the finger this change.
On the Bitcoin Blockchain, single-signature transactions are materialized by the signature of the one and only owner of the private key associated with a wallet. But more complex transactions also exist, with the signing of several keys / several machines. Other blockchains are much more optimized than those of Bitcoin on this point, but now the flagship cryptocurrency is also starting to adopt indiscriminately these transactions with multiple signatures. Moreover, Schnoor signatures no longer limit the number of 15 signatories on a transaction, as was the case with the ECDSA process.
3 / Lower transaction fees
On the Bitcoin Blockchain, lowering transaction costs is not as urgent as it is on Ethereum. But with the Taproot update, it will still cost even less. Schnoor signatures, which enhance multi-signature transactions, will take less resources to be processed and the consequences are direct for users. “With less data involved, transactions will become more efficient in terms of energy and time” , explained Tyrone Ross, CEO of Onramp Invest.
To synthesize, the Taproot update can be retained as the realization of the integration of Schnorr signatures in the Bitcoin Blockchain. Schnorr signatures have been talked about for a long time and December 2019 marked the end of revisions for its implementation. But we still had to rely on a “soft fork” for integration into the Bitcoin software. This is happening today and the biggest breakthrough concerns the facilitation of the creation of smart contracts. Overall, transactions will also be cheaper and pave the way for multi-signature wallets, which are much more secure.
Our ranking of the best crypto platforms: