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Explained - What is Taproot and How it will affect bitcoin?

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Pavan A Follow


Jul, 07 2021

Jul, 07 2021

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The world's most valued cryptocurrency finally gets its upgrade called Taproot after four years. Bitcoin miners globally have approved this new update, which will take effect in November.


The new update for Bitcoin will be developer-friendly to complete with the feature-rich Ethereum, which is a top choice for most developers and has the most developers contributing to its network.



Taproot is one of the most anticipated upgrades in years, which changes the way Bitcoin's script operates. This update combined with a related upgrade called Schnorr signatures improves privacy, scalability, security, and other factors related to complex transactions.


This update makes detection of transactions next to impossible as Taproot makes it possible to hide the fact that a Bitcoin script ran at all.


The Benefits of Taproot

Bitcoin's Taproot update will add additional security and privacy features, making it harder to trace payments. Till now, cryptocurrency uses the “Elliptic Curve Digital Signature Algorithm,” in which, only the rightful owner could get access to the bitcoin. After the update, it will switch to Schnorr signatures, enabling a multi-signature feature making transactions unreadable.


The update will unlock the potential for smart contracts, the most useful self-executing tool of blockchain technology that eliminates middlemen from transactions. This will definitely delight a lot of crypto users as the smart contracts will be cheaper and smaller in terms of the space they take up on the blockchain, along with an upgrade in transaction privacy and efficiency.


Prior to the update, anyone could detect bitcoin transactions using timelock or multi-signature. Taproot update will reduce this vulnerability and enhances privacy by making transactions private and appear as a single transaction.


The Taproot will reduce the data for processing complex transactions in the network, which involves multiple signatures or time-locking. It also enhances the wallet functionality by allowing developers to set more complex conditions for wallets. This is beneficial in case you lose any of your private keys.


The new upgrade is a boon for all crypto users and a bane for government regulators because the anonymity feature makes it difficult to trace the transactions done for illicit purposes.


Will this new Taproot upgrade make any difference?

Well, it depends on the priorities. Bitcoin advocate, Jimmy Song, suspects that the new update will attract more people to the Bitcoin market.

He says, “I expect it'll attract people that actually understand the value of the security. People playing with altcoins are concerned with token appreciation, not self-sovereignty so I suspect people like that won't be too interested in Taproot,”


Nicolas Dorier. The founder of BTC Pay has a different view on this new update. According to him, for the majority of users who tend to use single-signature bitcoin wallets and transactions, the implementation of Taproot won’t actually reduce the fees. However, he thinks this update will lead to widespread adoption of bitcoin in the near future.


“I don't think Taproot will bring more people to Bitcoin. The perceived value will come from the protocols that can be built on top of it, and it is difficult to predict if there will be some new protocol as popular as Lightning coming,” he said.


Some experts even expressed their concerns, saying that Taproot's privacy upgrade won't have any major impact and this is temporary and even impact negatively.

This progress comes amid Bitcoin’s increasing mainstream adoption as a legal tender by countries like El Salvador, which had passed a Law to legalize Bitcoin. As a lot of people around the world are getting attracted to cryptocurrencies and are aware of the latest development in the crypto space, many more developments will be seen in the future.

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Pavan A

CBW - External Analyst


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