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Beginner’s Guide to Understanding Taproot

5 mins
Updated by May Woods
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Many users struggle with the lack of privacy options in Bitcoin transactions. They want the network to move faster and keep their information more secure. Unfortunately, the original Bitcoin network was meant to be a trustless, public ledger, and privacy didn’t factor in too highly. That said, traders are still interested in upgrading Bitcoin’s privacy features. Enter Taprootone of the more recent upgrades coming to Bitcoin’s blockchain network.

KEY TAKEAWAYS
• Taproot enhances Bitcoin’s privacy and efficiency by introducing Schnorr signatures and Tapscript, allowing more private and flexible transactions.
• Taproot is a backward-compatible upgrade (soft fork) that improves security and reduces transaction fees, with 90% of the network already in consensus.
• Taproot officially went live on the Bitcoin network on Nov. 14, 2021. This marked a significant upgrade to Bitcoin, enhancing privacy, scalability, and security.

What does Taproot mean?

In general terms, a Taproot is the deepest, strongest part of a plant. It grows down way into the ground, branching out and expanding every which way, making it very difficult to remove. In terms of crypto, Taproot is a Bitcoin upgrade that aims to change the entire philosophy and technology behind the cryptocurrency. In a way, it’s planting down roots and holding down the Bitcoin network, while also expanding it and bringing with it new features in terms of security, scalability, and more.

What is Taproot for Bitcoin?

In terms of Bitcoin, Taproot is a soft fork. This essentially means it’s a backward-compatible upgrade. It includes new transaction types, security features, and many other types of upgrades.

What separates a soft fork from a hard fork is that only a network majority must agree to upgrade for it to come into effect. With a hard fork, the entire network must agree, making previous blocks entirely invalid.

https://x.com/caueconomy/status/1714687349425115183?bic=2

Now, it is time to understand that Bitcoin is not a private network. Transactions made on the Bitcoin blockchain can be viewed by basically anyone, considering it is a public ledger. Some crypto enthusiasts are not a fan of this, considering a big blockchain mantra is anonymity. While there are ways around this, these methods are generally a pain and not very mainstream-friendly at all. Examples are coin mixing and using Tor, among others. Many believe there should be a more integrated solution. This is what Taproot is for.

Put simply, the upgrade has three parts: Tapscript, Schnorr signatures, and Taproot itself. The Bitcoin Improvement Proposals (BIP), namely BIP 340, 341, and 342, introduce each of these parts.

Let’s get into each improvement and how it could benefit the Bitcoin blockchain.

Schnorr signatures

Schnorr signatures enable multiple keys to be come into a single transaction, with one signature empowering them. This means that if multiple parties come in, their participation remains secretive, appearing as a single transaction. Additionally, they are smaller in size in comparison to traditional Bitcoin signatures, reducing transaction fees and allowing more transactions to be included in each block. This results in faster block validations and increased transaction throughput.

Comparing Schnorr signatures with regular ones in Taproot
Schnorr signatures: Brennan Fife

Tapscript

Tapscript, introduced in BIP 342, is a scripting language that supports advanced transactions on the Bitcoin network. It enables a payment type known as Pay-to-Taproot (P2TR), allowing users to transact via a Schnorr public key or through other methods within the network. This flexibility offers users the choice to maintain privacy or transparency based on their needs. Tapscript also validates these new transaction forms, enhancing the network’s overall functionality.

Taproot

Taproot is a part of BIP 341, which holds the scripts required to properly integrate Tapscript and other signature/key changes. It can also more generally refer to all three script upgrades.

Hopefully, those details helped answer the question “What is the Bitcoin Taproot Upgrade” question. Now that you’re aware of the changes, let’s clearly break down how it’ll benefit Bitcoin.

How Taproot benefits Bitcoin

As previously mentioned, the upgrade benefits Bitcoin in the following ways:

  • Increased transaction privacy
  • Lower transaction fees
  • Faster transaction speeds
  • Better security

Most of the prominent Bitcoin developers backed this network upgrade. That said, implementation wouldn’t be easy. For Taproot to come into effect, the network needed at least 90% of all nodes to agree on the matter. Fortunately for the upgrade, this consensus came to be in June 2021.

Recent development:

In 2024 Taproot transactions account for approximately 15% of all Bitcoin transactions, with over 50% of major wallets and exchanges supporting it. The upgrade has also facilitated the growth of DeFi applications on Bitcoin, and its integration with the Lightning Network has improved transaction privacy and speed.

When did Taproot go live?

Taproot officially went live on the Bitcoin network on November 14, 2021, following widespread support from the Bitcoin community. The upgrade required at least 90% of nodes to signal their agreement, a threshold that was met in June 2021.

Since its activation, Taproot has gradually gained adoption, with approximately 15% of all Bitcoin transactions utilizing its features as of September 2024. The upgrade has been a significant milestone, enhancing privacy, efficiency, and scalability on the Bitcoin network. Its implementation has also paved the way for more complex smart contracts and decentralized applications, further solidifying Bitcoin’s role in the existing cryptocurrency space.

The project came to be in 2018 when Gregory Maxwell, a Bitcoin Core developer, presented his idea in an online document. Interestingly, security experts like Edward Snowden were not fans of the Taproot idea, though most Bitcoin developers are.

The last time Bitcoin experienced an update this big was its Segregated Witness (SegWit) upgrade in 2017. This upgrade was good for the network, as it reduced transaction sizes so more information could fit into blocks. Of course, this upgrade had its fair share of negative press, as does most upgrades on any blockchain network.

Empowering Bitcoin transactions

Taproot has become one of Bitcoin’s most significant upgrades since its launch in November 2021. Over the past few years, it has empowered the network by enhancing privacy, efficiency, and scalability, meeting the high expectations of the Bitcoin community.

With its integration, Bitcoin has continued to evolve, supporting more advanced transactions and paving the way for decentralized applications on the network. In 2024, Taproot remains a cornerstone of Bitcoin’s ongoing development, helping the network adapt to the ever-changing demands of the cryptocurrency space.

Frequently asked questions

What is Taproot?

How does the Taproot upgrade enhance Bitcoin’s functionality?

What are the benefits of Taproot?

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Max Moeller
Max is a cryptocurrency journalist with an affinity for games and emerging technology. After leaving school to start a writing career, he wrote his first article on blockchain and fell down the rabbit hole. Since starting in 2017, Max has worked with multiple blockchain startups and crypto enthusiast spaces, doing his best to educate the world on the nascent technology. Max has been published in various blockchain and crypto related magazines before settling down at BeInCrypto to focus on...
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