Bitcoin’s Taproot Upgrade: A Cautious Step in the Right Direction

Bitcoin’s Taproot Upgrade: A Cautious Step in the Right Direction

Bitcoin developers have spent four years developing and deploying Taproot on its mainnet. So far, there have been no reports of failures, errors, etc., to hinder the upgrade, a clear sign of a stable upgrade.

The purpose of Taproot is to improve the usability and privacy of cryptocurrencies and at lower transaction costs. Earlier this year, 90% of Bitcoin miners approved the Taproot upgrade, delivering another significant programming improvement since the 2017 SegWit upgrade patch, which improved Bitcoin’s scalability. So, what problems can Taproot now solve after going live on 14 November 2021?

 

What is Taproot?

Greg Maxwell, a Bitcoin Core developer, first proposed the Taproot upgrade in January 2018. This was followed up by Pieter Wuille who submitted a code acquisition request in October 2020, and Taproot was incorporated into the Bitcoin Core codebase.

Taproot is a Bitcoin soft fork that improves the Bitcoin script. Its goal is to enhance other relevant indicators of complex transactions while increasing privacy.

By releasing time locks and requiring multiple signatures, transactions on the Bitcoin network can become more complex. Anyone can detect transactions that use complex functions, which necessitate the creation of various transactions, without Taproot. The upgrade may conceal some activities associated with such transactions. So now even when these functions are used in a transaction, they appear to be a single transaction. This is a significant change for Bitcoin users who value their privacy.

Taproot has the ability to make people completely invisible to the Bitcoin scripts that are running. For example, after implementing Taproot, different Bitcoin payment methods look the same, whether they are Lightning Network channel transactions, peer-to-peer transactions, or through complex smart contracts. Only peer-to-peer transactions are visible to the monitors of these transactions. However, it is worth noting that Taproot has not changed the fact that the wallet information of the sender and the ultimate recipient is exposed.

 

Bitcoin’s urgent problems

People’s attitudes toward Bitcoin have shifted in recent years. Many people appear to be more willing to use Bitcoin as a tool to combat inflation, and I believe it indeed has superior properties as a store of value.

On the other hand, millions of Bitcoin owners want to see it used more as an accounting unit and payment method; the other two primary functions are defined as currency. The adoption of Bitcoin as a national currency in El Salvador, the first nation to adopt the digital asset officially, is the clearest example of its potential as a currency to date.

Although Bitcoin is regarded as an elegant solution for person-to-person financial transactions, its coding has remained essentially unchanged since its inception in 2008 by a person or a group of people under the pseudonym of Satoshi Nakamoto. These purposefully simplified programming parameters of Bitcoin limit the number of transactions per second, network bandwidth, and settlement speed, enabling a typical block size regardless of data size, reducing efficiency, and increasing transaction costs.

With the introduction of other blockchains, such as Ethereum and Cardano, which can speed up actual transaction payments and provide more complex services, such as DeFi and NFT, the advantages of Bitcoin are becoming less clear.

 

The improvements Taproot provides for Bitcoin

Taproot is a collection of three separate Bitcoin improvement protocols, technically titled BIP 340, 341, and 342. In addition, they will collaborate to provide the following enhancements to the creator of this digital asset:

⦁ Bitcoin transactions will be bundled together during the verification process, reducing total transaction volume while automatically sharing costs among the bundled user transactions.

⦁ Binding features are used in one of the BIP upgrades to improve transaction privacy.

⦁ The most recent Taproot upgrade improved the features and functions of smart contracts in each Bitcoin block.

Schnorr signatures used by the Taproot upgrade will also reduce the amount of data needed for multi-signature transactions, which are more complicated to process than standard ones. And with lesser data involved, transactions will become more time-efficient, thereby making the transactions cost-efficient.

Although Taproot’s upgrade has accelerated Bitcoin’s progress, it still falls short of smart contracts functionality common to Ethereum, Cardano, and Solana, which have many built-in functions and mechanisms to deal with ‘just in case scenarios.

 

Breathing new life into Bitcoin

Some may question the value of the Taproot upgrade regarding these programming enhancements as little more than a coding ‘catch-up’ by the Bitcoin developer community.

However, a more balanced view is to regard this as “an overwhelmingly positive upgrade to the Bitcoin protocol, but it is not itself enough for investors to get excited.” This is echoed by Anndy Lian, intergovernmental blockchain expert, and Chairman, Asia at BigONE exchange: “Bitcoin Taproot is indeed promising to tech guys like me. But investors’ enthusiasm over the upgrade seems to be neutral as reflected by the price. I am sure over time, everyone can see its impact clearer.” The key to this thesis is that the idea that Bitcoin as a smart contract blockchain is over-exaggerated. What positives there are related to the fact that the upgrade has been accomplished without any technical mishap, and through a successful community consensus process that bodes well for the future. It also lays the foundations for valuable use cases in the future, for example in the growth of payments rails for the metaverse.

 

Original Source: https://hackernoon.com/bitcoins-taproot-upgrade-a-cautious-step-in-the-right-direction

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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“Understanding Blockchain after the Hype”: We must do the right thing with blockchain- Anndy Lian

“Understanding Blockchain after the Hype”: We must do the right thing with blockchain- Anndy Lian

“Understanding Blockchain after Hype” is an event organised by Wealth Secrets in partnership with www.blockcast.cc, www.blockreview.net and TWOgether. The organisations came together to share insights and clarify myths and tales behind blockchain technology and cryptocurrencies. They will also address trends in the industry.

The panel of experts consist of Jenny Zheng – Co-founder Blockcast.cc; Anndy Lian – Intergovernmental Blockchain Advisor; Davy Goh – Founder Passion Venture Capital and
Dr. ir Johannes (JD) Drooghaag – CEO Spearhead Management. Hosted by Nana Kay and The,Myst from Wealth Secrets Podcast.

The panel has answered the following questions:

1. In your own terms, what is the blockchain?

2. What are the main benefits of using blockchain technology?

3. What are the key challenges in the way of adopting blockchain technology?

4. A) Could you briefly take us through the three main types of blockchain technology (permission-less, public systems; private, permissioned systems; and hybrid systems)?

4. B) What are the use cases for each of these systems?

5. Do you believe that blockchain can only achieve its true potential if cryptocurrency goes mainstream? Or, is it possible for the blockchain to thrive independently of cryptocurrency?

6. With Tesla, Bank of New York Mellon, JP Morgan, Goldman Sachs, Deutsche Bank and a host of other institutional players accepting cryptocurrencies, is the digital currency movement well on its way to going mainstream, or is there a long way still to go?

7. A) What are the global jurisdictions that are taking a lead in the adoption of blockchain technology? Thoughts on countries rejecting Bitcoin and other crypto//blockchain projects?

7. B) What could be Bitcoin’s Achilles heel? Will it be sustainable considering its energy demands?

8. The recent Blockchain Africa conference held by Bitcoin Events delivered an optimistic outlook for the cryptocurrency and blockchain space in the continent as the world settles into a new normal dictated by COVID-19. Do you think the continent will be able to reap the benefits of leapfrogging in the area of blockchain, similar to what it did in mobile payments with M-Pesa?

9. Is Blockchain living up the hype? Final Thoughts?

 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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Anndy Lian, Advisory Board Member at Hyundai DAC Spoke at Global DeFi Summit “Do the right thing for DeFi for it to grow.”

Anndy Lian, Advisory Board Member at Hyundai DAC Spoke at Global DeFi Summit “Do the right thing for DeFi for it to grow.”

Anndy Lian, an early adopter of blockchain and cryptocurrency spoke at the Global DeFi Summit on 6 January 2021.

“Decentralized Finance (DeFi) will see a stronger interest from institutional investors this year. The macroeconomic trends of low-interest rate globally will also mean DeFi is more relevant to the companies. Traditional finance world keeps breaking, money and people will be redirected to Defi.” Anndy Lian shared.

What is the fastest-growing DeFi area or trend in 2021?

Defi will continue to grow rapidly in 2021.

A) Staking on Defi will grow faster than in 2020. This is closely linked to Ethereum 2.0. The launch of 2.0 is a critical step towards scaling ETH to a much larger capacity. The shift to POS allows huge amount of wealth to be staked as collateral. I would also think more users will not leave their ETH on exchanges. This then spurred to another observation.

B) I think there will be more Cefi and Defi integration in 2021. We will see integrations in traditional products. Crypto backed derivatives and cross-chain products will hit its peak by Q3 2021. We may also be seeing more crypto proprietary trading in 2021.

What challenges should we expect to arise for DeFi in 2021? Will regulators attempt to restrict or limit it in any way?

The challenges did not change. The reason why Defi grew so fast is due to the flawed financial structure. Governments will step in hard for 2021 but they are still playing a catch-up game. Based on what I know, governments know there are underlying enforcement issues. They are resorting to looking at using on-chain digital id to track and trace and enforce AML but this will again take time.

For example, DeFi lending projects will most likely be regulated in a similar way as financial institutions that offer margin lending. They will also be asked to register as a bank, a non-bank lender or a broker.

In conclusion, Anndy emphasized that we need to work closely together in this ecosystem and do the right thing for DeFi to grow.

Anndy Lian is an early blockchain adopter and experienced serial blockchain entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030” and currently the Advisory Board Member of Hyundai DAC Technology. He plays a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region. Anndy is also part of the Gyeongsangbuk-do Blockchain Special Committee, Government of Republic Korea, together with industry experts such as Brock Pierce.

This event is organised by Gulf Xellence and sponsored by YFDAI. Blockcast.cc is the PR company representing Anndy Lian.

 

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Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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