Bitcoin which is now the world's largest cryptocurrency was launched in 2009 alleged by Satoshi Nakamoto. The main purpose of launching a Bitcoin was to reduce the dependency on Fiat currency; in short to make currency decentralized as the Fiat Currencies are centralized(Control by central banks).
But, Bitcoin Being a decentralized currency is not handled by anyone institution or Government. Bitcoin, in the decade, has come a long way to become the world's largest Cryptocurrency. It works on the Smart Contracts on Blockchain Technology. This is used as a normal currency in some trading.
Over the years, many cryptocurrencies have been developed on blockchain technology and have some applications which are helpful in technological advancement. These currencies have started to overshadow Bitcoin as they were made to overcome Bitcoin's Shortcomings which is why this up-gradation has come into the picture.
Bitcoin Taproot: what is it?
Bitcoin Taproot is the upgrade of the Bitcoin which is going to occur on 16, November 2021. It is seen as the major up gradation in Bitcoin as the last upgrade occurs in 2017 and it caused a price jump of 50%.
The upgrade is seen as the need of the hour, as bitcoin is the world's largest cryptocurrency started to get overshadowed by other cryptocurrencies which provide better privacy, secure transactions between users without middle intermediaries (aka smart contracts).
last upgrade- 2017 referred to as "last Civil war" because of the contentious ideological divide separating adherents – but now Taproot has near-universal support in part because these changes are fairly incremental improvements to the code.
This upgrade is designed to increase transactional privacy and efficiency and crucially this will open the doors to unlock the potential for smart contracts.
Two major changes could be done in this upgrade which is right now, Bitcoin uses something called the "Elliptic Curve Digital Signature Algorithm(ECDSA)" will be replaced with the "Schnorr Signature Algorithm(SSA)" it can be understood as with ECDSA; If 10 different users sent BTC to a single wallet address (public key) under the current setup, it would appear on Bitcoin's ledger as 10 separate transactions. But using SSA, Bitcoin's network will be able to bundle these 10 transactions into one transaction with a unique key.
Secondly, the Taproot upgrade will be able to compress complex conditions required for transactions into one single line of data under what's called the Merklized Alternative Script Trees (MAST) to the blockchain's code, making it a more streamlined process.
Why it is needed?
Currently, running smart contracts on bitcoin's core protocol layer is not exactly feasible. It is quite expensive and time-consuming, thereby rendering it almost useless.
These changes can be seen as revolutionary as they will change both the transaction and execution takes up storage on the blockchain and bitcoin transactional fee has increased when more space is taken up.
Another more important thing is the user will have much more privacy when it comes to using Bitcoin. Its digital transaction record has unintentionally made Bitcoin less private than cash. As a result, many blockchain analytic firms can monitor users' transactions and uncover their personal information based on their public key. But when transactions are bundled together with just one unique key, it's much harder to deduce who sent the BTC. This will make BTC compete better with coins designed to obfuscate wallet addresses and shield observers from tracing transactions.
The other reason for this upgrade is to make transactions the least expensive. The technology behind Bitcoin is pretty old, and until Taproot goes live, it can only handle about four transactions per second. Each basic transaction costs about $5 to $75, and with smart contracts, users would need to pay more in fees as they take up more space on the blockchain.
Conclusion
In the nutshell, this upgrade will provide better privacy for users who do transactions in Bitcoin, and with this new upgrade, it will be the least expensive to do transactions. It may also attract many new investors in the future who could find bitcoin more suitable to invest in it.
