Taproot Upgrade Aims to Fix a Few of Bitcoin's Root Problems
The Taproot upgrade should boost Bitcoin's privacy and smart contract functionality, while lowering transaction fees.
- It's taken Bitcoin developers four years to draw up and deploy Taproot, which went live on the blockchain's main network this past weekend.
- The intent for Taproot is to improve the crypto's usability and privacy at lower costs per transaction.
- This summer, 90% of Bitcoin miners approved the upgrade -- it's the first major programming improvement since the SegWit patch in 2017 that improved its scalability.
Early this week, the most significant programming update in four years -- Taproot -- was deployed across the blockchain network of the first cryptocurrency ever created, Bitcoin. So far, there have not been any reported glitches, bugs, or the like hindering the upgrade, which is good because Bitcoin could use a refresh.
Bitcoin issues needed to be addressed
For the past couple of years, the perception of Bitcoin has shifted and focused on its superior attributes as a store of value against inflation -- it's one of the best. However, millions of Bitcoiners want to see it used more as a unit of account and method of exchange, which are the other two main functions of money.
Even though Bitcoin was conceived to be an elegant solution for person-to-person financial transactions, it had very basic coding in the beginning that has largely remained unchanged. Those intentionally simple programming parameters throttled back the number of transactions per second, network bandwidth, settlement speed, and enabled a generic block size regardless of data size that reduced efficiencies and increased transaction costs.
Other blockchains such as Ethereum, Energi, and Cardano have emerged which do basic payments faster as well as more complex offerings such as decentralized finance (DeFi) and trading of non-fungible tokens (NFTs).
The Taproot fixes explained using an Uber analogy
Taproot represents a collection of three separate Bitcoin Improvement Protocols (BIPs) -- BIP 340, 341, and 342 respectively. Together they will provide the following enhancements to the granddaddy of digital assets.
- Bitcoin transactions will be bundled together through the validation process, reducing the overall volume while automatically splitting expenses across the users' transactions within the bundle. It's kind of like ride sharing with an Uber van, all passengers pay less than a single individual.
- One of the BIP upgrades uses the bundling feature to enhance transaction privacy. Going back to the Uber example, think of tinted windows that don't allow you to see who's inside or what they're carrying.
- The last Taproot boost enhances the features and functions of smart contracts within each Bitcoin block. So going back to the Uber van, the seats inside are now upgraded from a wooden bench to something like a business class airplane seat with a video screen, portable table, and audio jack.
But that still doesn't quite compare to the Ethereum, Cardano, and Solana smart contracts, which would be analogous to Uber seats with built-in immersive VR headrests, free Netflix, auto heat and massage rollers, with a parachute and "eject button" -- just in case.
Our top crypto play isn't a token - Here’s why
We’ve found one company that’s positioned itself perfectly as a long-term picks-and-shovels solution for the broader crypto market — Bitcoin, Dogecoin, and all the others. In fact, you've probably used this company's technology in the past few days, even if you've never had an account or even heard of the company before. That's how prevalent it's become.
Sign up today for Stock Advisor and get access to our exclusive report where you can get the full scoop on this company and its upside as a long-term investment. Learn more and get started today with a special new member discount.
Taproot seems to have injected new life into Bitcoin
Critics may claim that these programming improvements are little more than coding catch-ups for the Bitcoin brand. While that's true to a degree, many within the crypto industry were claiming that Bitcoin was obsolete or at least outdated. This smoothly deployed batch of programming patches seems to suggest that rumors of its demise are overstated.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
Tor Constantino owns Bitcoin.