Bitcoin Taproot locked in to improve privacy and introduce smart contracts


On June 12, Bitcoin mining pool Slush Pool mined block 687,285 with the transaction including a Taproot upgrade activation signal. That particular block was the 1,816th to include a signal for Taproot activation by a BTC miner within the difficulty epoch that lasted from May 30 to June 13.

With 2,016 blocks created every difficulty period, crossing 1,816 blocks with a Taproot activation signal satisfied the 90% signaling threshold required to lock in the upgrade. This event meant that Taproot, Bitcoin’s first protocol upgrade in over four years, was set for its activation phase to be expected in mid-November.

Apart from bringing an end to the signaling period that lasted about six weeks over three consecutive difficulty epochs, block 687,285 also brought forth a new milestone for the Bitcoin upgrade in development since 2018. BTC proponents say beyond the automatic activation happening near the end of the year, the focus should now shift to building wallets and other ecosystem applications that can leverage the improved scripting capabilities brought on by Taproot.

What is Taproot?

Before getting into the nitty-gritty of what Taproot is and how it works, it is perhaps important to present at least a high-level explanation of how Bitcoin transactions work. When sending BTC from one wallet to another, the sender’s public address uses a private key to create a unique cryptographic signature.

This cryptographic signature contains the necessary permissions that serve as proof to any nodes validating the transaction that the sender truly owns the funds being sent, thus fulfilling the spending condition. It is possible to create different spending conditions for unspent transaction outputs (UTXOs).

When UTXOs are spent, it becomes necessary to reveal all spending condition data — both the ones satisfied and the possible conditions that could have been met — a feature that comes with significant data usage and privacy implications. Taproot is an upgrade designed to solve this issue by masking spending conditions, except those that are in the branch of the script agreed upon by the transacting parties.

With Taproot, it becomes possible to combine the public keys of all participating entities in a transaction to create a unique key. By creating a new output called Pay to Taproot (P2TR), it is possible to have output conditions with locked funds to a single public key rather than individual key or script hashes that require a complete accounting of all spending conditions included in a UTXO.

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