Slush Pool, a Bitcoin ( BitcoinTC ) mining pool, mined block 687 285 on June 12. The transaction included a Taproot activation signal. This particular block was 1,816th to contain a signal for Taproot activation from a BTC miner during the difficulty epoch, which lasted between May 30 and June 13.
Taproot activated signal triggered 1,816 blocks, which was enough to meet the 90% threshold for the upgrade. Taproot was thus set to activate its activation phase in mid-November, marking the first Bitcoin protocol upgrade in more than four years.
Block 687,285 marked a new milestone in the Bitcoin upgrade process since 2018. It also ended the six-week signaling period. BTC supporters say that the emphasis should shift from automatic activation near the end, to build wallets and other ecosystem apps that can take advantage of Taproot's improved scripting capabilities.
What is Taproot?
Before we get into the details of Taproot and its operation, it's important to give a basic explanation of Bitcoin transactions. To create a unique cryptographic signature, the sender's public addresses uses a private key.
This cryptographic signature includes the permissions necessary to prove to any nodes validating the transaction, that the sender actually owns the funds being transferred and fulfills the spending condition. You can create different spending conditions (UTXOs) for unpent transaction outputs.
UTXOs can be spent and all data about the spending conditions must be disclosed. This feature has significant privacy and data usage implications. Taproot, an upgrade that hides spending conditions except for those in the agreed-upon branch of the script, is designed to address this problem.
Riccardo Casatta (Bitcoin developer, one-time Square grant recipient) spoke to Cointelegraph about Taproot's basic concept. He stated, "The taproot update includes a lot of improvements, but the most significant improves privacy in long term."
One misconception about Bitcoin usage today is that it is private. However, transactions leave a lot of trace on the blockchain. Bitcoin can be sent to various addresses, such as starting with '1', '3', or 'bc1, depending on the version and smart contract. This can reveal information about user spending habits.
Taproot allows you to combine all public keys from participating entities to create one unique key. It is possible to create a new output, Pay to Taproot (P2TR), which allows you to lock funds to a single public keys. This replaces individual keys or script hashes that need to be accounted for in a UTXO.
Schnorr signatures are used to combine multiple signatures into one aggregate signature. Taproot supporters claim that multisignature (multisignature) signatures can be distinguished from single-signature counterparts by taking advantage of Schnorr's linear nature.
Taproot allows for different spending conditions to appear identical in the most frequent case. This is great as it gives less information about users and improves efficiency.
Miners support each other almost unanimously
Cointelegraph reported that Bitcoin's Taproot upgrade reached the 90% critical consensus with all mining nodes on June 12. The process was supported by almost all mining pools, and Taproot has been approved by them all.
Slush Pool started the process in May by mining the first transaction block using a Taproot activation signal. Perhaps it was fitting that the miner who actually locked in the upgrade was the fifth largest Bitcoin mining pool according to hash rate distribution.
Despite the slowing down of the signaling process due to China's May Day celebrations, miners began to agree to the upgrade by the second difficulty epoch. This almost unanimous support was the foundation of the miners' commitment to the upgrade, even though the plan was delayed by China's May Day celebrations.
Some miners had to modify certain firmware requirements in order to signal. This led to delays in achieving the required 90% consensus within the first month. Even though the number of miners signaling increased to 70% in the first three days, it fluctuated between 40%- 70% during the second difficulty epoch.
F2Pool, AntPool, and F2Pool were ranked first and second respectively in terms of hashrate distribution. and Foundry USA were early supporters for the activation. By May 17th, all major mining pools were signaling for Taproot . This included Binance, which had its first transaction block. BTC.Top was late, as the mining pool had to test protocols to signal for Taproot.
Privacy, Scalability, and Smart Contracts
Taproot is a major improvement in Bitcoin's privacy, according to several Bitcoin developers. Pieter Wuille (Bitcoin developer at Chaincode, and one of the early supporters of Taproot's upgrade) made the following comments in a June conversation with Cointelegraph:
"It [Taproot] extends Bitcoin’s script capabilities in ways which make certain things more affordable (especially complex applications like multisignature and layer-two), and a little more private by hiding the spending rules.
Taproot offers significant block space reductions for transaction data, as well as masking spending conditions and making transactions undistinguishable. This feature can reduce transaction throughput and compress multisig transaction data, but it's not a solution to Bitcoin's scaling issues.
It opens up smart contracts on Bitcoin blockchain because the upgrade already reduces the space required for multisig transactions within a block. By nature, smart contract transactions involve interactions between multiple addresses and users.
These smart contract operations with Taproot will not look any different to a wallet-to-wallet BTC transaction. Casatta shared with Cointelegraph some possible smart contract use cases once Taproot is activated in 2021.
"In the long-term, I see an increase of Bitcoin smart contract usage. This will enable use cases such as inheritance and delegation in company expenditures. The best thing is that we won't know anything about it if we look at the blockchain.
Many Bitcoin developers agree that, beyond November activation network participants will need create useful applications based upon the upgrade. At block height 709 632, the upgrade will be activated according to Bitcoin Improvement Protocol 341.
Taproot will not be a hard-fork upgrade. This means that participants in the network are not required to accept the change. Service providers will likely update their software to support Taproot, due to the potential fee benefits.