{"id":236,"date":"2021-12-02T06:22:22","date_gmt":"2021-12-02T06:22:22","guid":{"rendered":"https:\/\/mapleblock.capital\/blog\/?p=236"},"modified":"2022-12-10T19:38:27","modified_gmt":"2022-12-10T19:38:27","slug":"november-2021-an-explainer-on-taproot","status":"publish","type":"post","link":"https:\/\/mapleblock.capital\/blog\/november-2021-an-explainer-on-taproot\/","title":{"rendered":"November 2021 – An explainer on ‘Taproot’"},"content":{"rendered":"
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Last month Bitcoin underwent one of its most major set of upgrades in the past 4 years, known as \u2018Taproot\u2019, the upgrade focused on improving cost, efficiency and to some extent privacy on the Bitcoin network. The Taproot upgrade implements 3 BIPs 340, 341 and 342. In this month’s coverage we take a look at the upgrade and what it could potentially mean for the Bitcoin network.<\/p>\n\n\n\n

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What is Taproot?<\/strong><\/h1>\n\n\n\n

Taproot is the latest step in Bitcoin’s evolutionary path and it aims to improve the network’s overall usability by making transactions cheaper, faster, and easier to implement, as well as laying grounds for the deployment of smart contracts in the future.<\/p>\n\n\n\n

Furthermore, Taproot brings significant privacy related changes, namely, that all transactions would appear identical to everyone except the transacting parties. From a design standpoint, this camouflage-based structure appears to be moving Bitcoin closer to some privacy-focused coins.<\/p>\n\n\n\n

Taproot with itself brings another upgrade known as Schnorr signatures. Schnorr signatures allow aggregation of signatures that allows far faster validation of batched signatures.<\/p>\n\n\n\n

Technical Breakdown<\/strong><\/h4>\n\n\n\n

Taproot is converts the representation of complex Bitcoin transactions, such as multi-signature transactions and transactions used to set up a Lightning channel, to look exactly like a regular Bitcoin transaction when submitted on-chain by combining Schnorr signatures and Merkelized Abstract Syntax Trees, or MAST. This means that the lightning channel transactions gain enhanced privacy by making complex multi-party transactions look similar to regular transactions between two parties<\/p>\n\n\n\n

The simplified reporting also means that the amount of data recorded on chain is reduced, resulting in more transactions that can be submitted per block, and reduced transaction fees at the end of it all<\/p>\n\n\n\n

BIP 340<\/strong><\/h4>\n\n\n\n

This BIP details<\/a> the use of Schnorr signature over the Elliptic Curve Digital Signature Algorithm (ECDSA) scheme used to calculate public keys from private keys<\/p>\n\n\n\n

BIP 341<\/strong><\/h4>\n\n\n\n

This BIP details<\/a> the use of Merkalized Abstract Syntax Trees (MAST) which were part of BIP 114 & 117. MAST reduces complexity of transactions and offers a new version of transaction output called Pay-to-Taproot. Transacting with P2TR, user can either pay a single public key or one the keys inside the Merkle tree<\/p>\n\n\n\n

BIP 342<\/strong><\/h4>\n\n\n\n

This BIP is an update to Bitcoin\u2019s scripting language, and known as the \u2018Tapscript\u2019 update. The update adds a collection of new \u2018opcodes\u2019 and removes the 10,000 byte script size limit. This adds scope for further improvements of putting code on the blockchain<\/p>\n\n\n\n

What are Schnorr signatures?<\/strong><\/h1>\n\n\n\n

Schnorr signatures consist of a cryptographic signature scheme developed by Claus Schnorr \u2013 a German mathematician and cryptographer. Schnorr signatures are primarily known for their simplicity and efficiency in generating short signatures.<\/p>\n\n\n\n

The signature scheme adopted by Satoshi Nakamoto (the creator of Bitcoin) was the Elliptic Curve Digital Signature Algorithm (ECDSA). The choice of ECDSA over the Schnorr signature algorithm was due to the fact that it was already widely used, well-understood, secure, compact, and open-source. <\/p>\n\n\n\n

However, the development of the Schnorr Digital Signature Scheme (SDSS) may be the starting point of a new generation of signatures for Bitcoin and other blockchain networks. One of the main advantages of Schnorr signatures is that they\u2019re able to take multiple keys inside a complex Bitcoin transaction and produce a single unique signature. This means that the signatures from the multiple parties involved in the transaction can be \u201caggregated\u201d into a single Schnorr signature. This is known as signature aggregation.<\/p>\n\n\n\n

Similarly, MAST are unique digital offerings that allow for the deployment of various user-selected conditions that must be fulfilled in order for an encumbered number of Bitcoins to be spent.Overall, this reduces storage and can indirectly lower fees for these transaction types. <\/p>\n\n\n\n

Implications<\/strong><\/h1>\n\n\n\n

With Taproot, transactions made from multi sig wallets when Lightning Network channels are opened and closed look identical to a transaction made from a regular wallet. This increases privacy for Lightning Network users theoretically making the Lightning Network a sort of high performance privacy layer for BTC transactions. <\/p>\n\n\n\n

From an ecosystem perspective, Taproot seems to be an all-in attempt by the Bitcoin devs and community to finally make the Lightning network a mainstream payment platform. The added privacy layer helps institutional players to adopt the network with more ease<\/p>\n\n\n\n

Besides enhanced privacy, other potential benefits include:<\/p>\n\n\n\n