In less than 40 days Bitcoin will implement its latest soft fork. The soft fork is scheduled for block height 709632 which should happen around the 17th of November 2021. This soft fork will include the implementation of two proposals, the Taproot update and Schnorr signature update.
What is Bitcoin Taproot?
Taproot is a name for the next Bitcoin protocol update (soft fork). This will be one of the and most important and anticipated updates since the SegWit upgrade from 2017.
The upgrade will add better scripting capabilities and privacy by implementing MAST (Merkelized Abstract Syntax Tree) which will replace currently used P2SH (pay to script hash). P2SH and MAST are ways of locking the transactions with conditions until the conditions are met. P2SH allows other users to see the conditions and allows everyone to see all the different ways they could have met the conditions. While MAST hides all the conditions except the ones that are met when the transactions are processed.
One other aspect of this upgrade is that it will also improve Lightning Network privacy by making Lightning Network channels look like regular bitcoin transactions.
What is Schnorr update you wonder?
Schnorr update brings multi-sig transactions natively to the Bitcoins signature algorithm. This is important since Bitcoin requires signatures to confirm the transaction. Currently, Bitcoin uses ECDSA, but this signature algorithm does not natively support muti-sig transactions. Schnorr's signature scheme can aggregate multiple signatures and output them as a single signature. This increases privacy and lowers transaction size and fees.
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Christoffer Vuolo Junros