Bitcoin’s Biggest Upgrade Since Segwit in 2017 Activated, Is Taproot Priced In?
On November 14, the long-anticipated Bitcoin upgrade, Taproot, finally activated at block 709,632.
This upgrade, the most significant soft fork since Segwit in 2017, will improve privacy, scalability, and security on the leading network.
In June, more than 90% of the miners signaled support for the upgrade that officially locked taproot in for Sunday's activation. Between this time period when the support was signaled and update activated, node operators and miners fully upgraded to the latest version of BitcoinCore 21.1, which contains the merged code for Taproot.
Taproot was first proposed by Greg Maxwell in 2018, and since then, three Bitcoin Improvement Proposals (BIPs) were written to be included in Bitcoin Core which did in October last year.
3 reasons I’m personally excited about #taproot:
1) the upgrade process gave us a good recipe for future upgrades
2) taproot will help proliferate new DLCs services and use cases, eventually bringing them to Lightning
3) 1 mil+ participant multisig federations are now possible
— Lyle Pratt (@lylepratt) November 14, 2021
“At long last, BIP341/342 (“taproot”) are active on Bitcoin mainnet,” said developer Pieter Wuille who wrote one of the related BIPs. “The real work will be in building wallets/protocols that build on top of it to make use of its advantages..”
As for what changes, “unless you're a wallet/protocol developer, probably nothing. Taking advantage of these new features requires software to make use of it,” added Wuille.
4/ Most of what you may have read about Taproot may be 'unsexy' but all of it is necessary to actually deliver working smart contracts.
Human beings are unlikely to come together to work on any contract that does not give them privacy & optionality.
— 7hacker (@readysatoshi) November 13, 2021
At the base of this upgrade is “Schnorr signatures,” which boosts the privacy of Bitcoin’s transactions and allows for more smart contracts, which is an encoded contract with self-executing rules.
Taproot hides the conditions that make up the contract, which is a private deal between a group of participants. Also, now a large number of participants can come together to create and execute a contract while ensuring that it looks like a normal transaction in the public view.
Following the upgrade on the weekend, on Monday, the Bitcoin price surged above $66,000, but according to Charles Edwards, founder at Capriole Investment, this event isn’t reflected in the price yet as “Bitcoin is notoriously bad at pricing events in.”
“Taproot unlocks massive value on the Bitcoin network. Lighting gave capability for legal tender and country adoption,” as seen in El Salvador, he said.
“Taproot gives greater security and unlocks massive potential for application development,” said Edwards, adding, as the leading cryptocurrency is adopted by more countries, banks, and payment rails, “the use of smart contracts on the biggest and most secure network is only going to grow exponentially.”