Crypto-Mastermind summary:

  • The long-awaited Bitcoin upgrades Schnorr and Taproot have been implemented in the Bitcoin core after thorough tests.

  • Schnorr enables more privacy for transactions by bundling the multi-signature wallet keys. Taproot allows the linking of conditions to transactions.

  • It may still take some time before the new features are activated, as in-depth testing is still required before the full release.


A significant day in the Bitcoin network took place on 15 October. The two Bitcoin Improvement Proposals (BIP) 340 and 341 have now also been integrated into the Bitcoin Core. The development of the updates had been in progress for years and they were long awaited. Once the features, also known as Schnorr and Taproot, are activated, this will mean improvements in transaction capabilities and data protection.


How the upgrades benefit the Bitcoin network

The Bitcoin network is repeatedly accused of being slow and lacking in innovation. In fact, the focus seems to be on simplicity, security and sustainability, which promotes long-term „healthy“ growth. But this does not mean that Bitcoin will always remain at the same level.

The Schnorr and Taproot updates represent one of the most important changes in the Bitcoin network. They add some very useful features to the Bitcoin script. Schnorr is based on another major enhancement in the code, SegWit (Segregated Witness), which was implemented in 2017. This increased the block size limit of Bitcoin.

With Schnorr, a new option for improved anonymity becomes possible. Currently, a multi-signature wallet mechanism allows multiple keys to be used to process a transaction. This makes traceability more difficult and thus increases privacy. However, with many keys in use, this can be expensive.

However, the update makes it possible to bundle several keys into one. On the one hand, users save costs by reducing the data size. Furthermore, the network is more relieved.

Taproot takes this improvement even further by eliminating the differentiation of addresses. It also introduces new general transaction capabilities. Conditions can be attached to the processing. For example, a time condition could be created for the release of a transaction.

Schnorr

When can everyone use Schnorr and Taproot?

Taproot was already recommended by Gregory Maxwell in 2018. In September 2020, Bitcoin developers were asked to test the code before it was fully released. This was done via the pull-request from Pieter Wuille. Since then, Taproot alone has been reviewed by over 150 developers.

When the functions will finally be available to everyone is still open. The decision about the activation mechanism has not yet been made. How long the release will take will probably depend on which mechanism is used. Currently under discussion are the BIP-8 and the Modern Soft Fork Activation.

As known from the Bitcoin network, not everything is simply implemented quickly, but rather thoroughly tested. But it is positive to observe that the developments are already close to completion.

Especially for more complex transaction processes of large amounts of money and for the fulfilment of contracts, the innovations would prove to be very useful. In general, the technologies would allow for cheap and private transactions, which could also be beneficial for other developments such as the Lightning Network.


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