What is Taproot?

Taproot is a significant upgrade to the Bitcoin network that was activated in November 2021. It introduced several improvements to Bitcoin's functionality, efficiency, and privacy. The upgrade consists of three Bitcoin Improvement Proposals (BIPs): Schnorr Signatures (BIP 340), Taproot itself (BIP 341), and Tapscript (BIP 342).

One of the key features of Taproot is the introduction of Schnorr signatures, which allow for signature aggregation. This means multiple signatures can be batched together and validated as a single signature, making multi-signature transactions faster and more efficient. Schnorr signatures also enhance privacy by making it more difficult to distinguish between different types of transactions on Bitcoin's public blockchain.

Taproot also improves Bitcoin's scalability by reducing the data size of complex transactions. This allows more transactions to be processed on the blockchain and leads to lower fees, especially for complex transactions. The upgrade enhances Bitcoin's ability to handle more sophisticated smart contracts, opening up new possibilities for decentralized finance (DeFi) applications on the Bitcoin network.

The implementation of Taproot introduced a new script type called Pay-to-Taproot (P2TR), which allows users to pay to either a Schnorr public key or the Merkle root of various other scripts. Additionally, Taproot introduced Tapscript, a new scripting language that replaced Bitcoin's existing ECDSA scripting, simplifying the development of more complex smart contracts.

While the full impact of Taproot is expected to unfold over time, it has already enabled new developments like Bitcoin Ordinals, a type of non-fungible token on the Bitcoin network. The upgrade represents a significant step forward in Bitcoin's evolution, enhancing its utility, privacy, and efficiency.