Analysts have criticized the Bitcoin Taproot upgrade as a “minor improvement to a technology that is already obsolete.”
Taproot went live on Nov. 13. This is Bitcoin Core’s first “major” upgrade since 2017, according to proponents. With the update, users can expect to see transactions become cheaper, faster, more secure and private, they say. Taproot will also improve smart contracts functionality on the network.
“The Taproot upgrade is interesting and a step in the right direction, but it does not change the fact that Bitcoin is technologically far behind other blockchains,” said Marek Kirejczyk, CTO of TrustToken, which operates decentralized finance (DeFi) lending protocol TrueFi and stablecoin TUSD.
Marek, a software developer who founded a few like-minded startups, argues that the new technology “improves privacy and throughput slightly, but nothing fundamentally.” He told Beincrypto:
This is the technology that was used in Monero years ago. While other blockchains like Ethereum implement radical scalability solutions such as Layer 2 and sharding, Bitcoin is undergoing a minor upgrade.
Marek cited Tornado Cash, which is built using a technology called Zero Knowledge, as an example of a “truly private solution.” He berated Bitcoin developers for “making minor improvements to a technology that is already obsolete.”
“It is encouraging to see Bitcoin progress, but with so little progress, it is almost as if it’s doing nothing at all,” he added.
Not so private
Taproot is the result of several Bitcoin improvement proposals (BIPs) supposedly meant to, among other things, improve privacy by obscuring transactions in order to make them more difficult to trace, according to Bitcoin developers.
Simon Lindh, creator of the Mempool, an open-source project that develops and operates an explorer for the Bitcoin community, tweeted that: “Taproot enables invisible Coinswaps which for the first time breaks the traces of your coins similar to a Coinjoin.”
“Chain analysis companies now have no chance,” he stressed. But that may not necessarily be true, critics say.
“It can still be traced,” one user responded. “Bitcoin does not have Monero privacy, so chain analysis can still track you down even after Taproot upgrade.”
Lindh admitted this to be “true to some extent” but averred that “if you Coinswap right after buying with KYC [know-your-customer] your coins are cleaned and your spend can’t be traced back to the coins you just bought.”
In addition, a more privacy-oriented Bitcoin network is likely to run afoul of anti-money laundering (AML) laws as now increasingly demanded by regulators from around the world. Regulators have long targeted the top cryptocurrency, considered to be a tool of those involved in a number of illegal activities.
“Bitcoin just announced its first upgrade since 2017…Good news for money laundering, tax evasion, and other illegal activities. The crooks must be jumping for joy,” ridiculed Steve Hanke, a well-know Bitcoin critic, and a professor of economics.
In December last year, the U.S. Financial Crimes Enforcement Network (Fincen), a government agency tasked with tracking financial transactions to curb issues of money laundering and terrorist financing, revealed specific plans to go after crypto assets.
It proposed new rules which require financial intermediaries such as crypto exchanges to report on and verify the identities of users transacting via unhosted wallets. Regulators in Europe are also tightening legislation around AML, specifically targeting crypto transactions.
Taproot also makes future Bitcoin upgrades easier by reforming Bitcoin’s scripting language, say developers.
However, bitcoin bear Cryptowhale described the upgrade as “some useless and overhyped tiny change to Bitcoin’s code that really doesn’t do anything. All it can do is turn complex transactions into simple ones, which 99% of altcoins already do. Bitcoin is so far behind other cryptocurrencies, it’s embarrassing!”
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