After four years of waiting, the world’s most popular cryptocurrency has been updated. Bitcoin has released a code enhancement called Taproot this Sunday. It aims to expand the capabilities of the smart contracts and make transactions more private and efficient.
This update comes with a 90% approval rating from the community. This is a high consensus in relation to the tense situation that was experienced in 2017. when, due to disagreement between stakeholders, the possibility arose for Bitcoin to split into two versions on separate blockchains.
The truth is that, as the world of cryptocurrencies is constantly evolving, they must be updated from time to time to strengthen their weaknesses and optimize their operation. As the Bitcoin protocol is open source, the developer community can examine it and make their contribution.
What changes does the latest Bitcoin update bring?
One of the most important changes in Taproot has to do with digital signatures. Currently, Bitcoin uses a system that creates a signature from the private key that controls a bitcoin wallet. This ensures that only the rightful owner can take control of this cryptocurrency.
Bitcoin’s November update adds Schnorr signatures. These make transactions with multiple signatures are indistinguishable simple as they will appear as a single standard transaction. This will make it more difficult to track and identify transactions thus offering greater privacy.
This update also brings improvements to the smart contracts, a self-executing system that lives on the blockchain and allows anything from voting in a survey to requesting loans. Now they will be cheaper, they will take up less space on the Bitcoin blockchain.
Applications that work with smart contracts are generally known as DeFi (decentralized finance). They are used mainly in Ethereum, Solana and similar projects, which have this functionality incorporated for a long time and have earned the trust of users.
The possibilities of DeFi are very wide. For example, when borrowing money for a project, instead of going to a bank, people will be able to access a DeFi platform and, meeting a series of conditions, request a loan. That is, they are presented as an alternative to the traditional financial system.
Bitcoin, for its part, has not been designed for smart contracts, but this update gives you the tools for a promising deployment. Currently, you can create smart contracts in the core protocol layer as in the Lightning Network platform, but they will take time to mature and continue to improve.