Taproot is providing an expanded toolbox for developers to work with as they continue to conceit and build on Bitcoin

First time in four years bitcoin upgrade has just gone live. Taproot development is a big deal for the world's most popular cryptocurrency and a rare moment of consensus among investors. The taproot development means to provide the best-in-class transaction privacy and efficiency – and crucially, it will unlock the potential for smart contracts that can be used to eliminate middlemen from transactions.

What is Taproot Development?

Taproot is a melting pot of various technical innovations throughout Bitcoin's history into one upgrade. It was first proposed by Greg Maxwell in 2018. Since then, the three Bitcoin Improvement Proposals (BIPs) that codified Taproot were written by Pieter Wuille, Tim Ruffing, A.J. Townes, and Nick Jonas merged into Bitcoin Core in October 2020. Taproot upgrades to a different scheme called Schnorr. Every transaction using Taproot will now use this new digital signature scheme, adding capabilities designed to boost the privacy, security, and scale of Bitcoin transactions.

Now, as you know what taproot is, here are things that will be changing:

Digital signatures

To ensure that bitcoin can only be spent by the rightful owner, Bitcoin uses the "Elliptic Curve Digital Signature Algorithm" to generate a signature from the private key that controls a bitcoin wallet.

After the taproot development, utilization of Schnorr signatures will be done to make multi-signature transactions unreadable.

Smart contracts

Schnorr signatures are also a game-changer for smart contracts better known as self-executing agreements that live on the blockchain. Theoretically, smart contracts can perform various transactions like paying your monthly rent, registering your vehicle, and more.

Taproot makes smart contracts affordable and customizable, in terms of the space they take up on the blockchain. Killeen says that this enhanced functionality and efficiency presents mind-blowing potential.

So, what does this taproot development mean for the investors?

Bitwise's Dowling said these large-scale upgrades have paved the way for the next phase of innovation in the bitcoin network. She noted that the last major upgrade in 2017 helped launch the lightning network, which facilitated much faster and cheaper bitcoin payments than before.