Bitcoin Taproot Is Live & Here’s What You Should Know

The activation of Bitcoin's Taproot upgrade went live this week. The update comes just as it appeared that Ethereum was about to overtake Bitcoin. Taproot represents the largest update in four years and sets the stage for Bitcoin smart contracts. The upgrade is a big deal for Bitcoin and may maintain its preeminence in the space. So let's take a closer look at this significant upgrade.

Bitcoin, Currency, Technology, Money, Cryptocurrency

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Bitcoin Improvement Proposal (BIP)

You may be wondering how improvements, like Taproot, can be made to a system created by a pseudonymous person like Satoshi Nakamoto. All of the discussion of "hard forks" and "soft forks" can get confusing, which makes understanding BIPs important.

A BIP is a standard for proposing changes to the protocol used by the Bitcoin blockchain. BIPs can lead to a hard fork protocol upgrade when the two blockchains exist side-by-side.. It can also be a soft fork (like Taproot) where the proposed change becomes the standard for the original blockchain as users adopt the new update.

Amir Taaki was the first to submit a Bitcoin Improvement Proposal (BIP) on August 19, 2011. The Python Enhancement Proposal (PEP) heavily influenced the process he outlined.

To get approval, a BIP begins as a draft proposal. Then, improvements are made by the author through community feedback. Finally, the proposal is implemented once the proposal reaches a community consensus.

Now you understand how to make changes to the Bitcoin network, let’s talk about the latest evolution in Taproot.

Taproot Basics

Understanding Taproot begins with the knowledge that it is a combination of many different BIPs and the consensus nature of the update means that it will become the standard as a soft fork. Let’s take a closer look at some of the proposals:

Schnorr Signatures (BIP 40)

  • This is a new form signature makes the signature hash unchangeable, aggregates signatures, increases security using on-chain heuristics, and incorporates batch verification to do bulk verification.

Taproot (BIP 341)

  • Allows Schnorr signatures and Merkelized Alternative Stress Trees (MAST) to be incorporated into the scripting language.
  • For better transaction processing, the new Pay-to-Taproot (P2TR) gives the choice of either Schnorr signatures or Merkle root processing.


  • This is a update to the Bitcoin script that allows for more than 10,000 byte script size, which will eventually allow for the creation of smart contracts.

Taproot Impact

Here's a summary of the BIPs incorporated into the new Taproot update.

  • Allows for the consolidation of transaction outputs that increase privacy
  • Expands the ability to program within the Bitcoin blockchain and opens the door to smart contracts
  • Improves the algorithm and structure of transactions to increase efficiency
  • Adds a dual signature blockchain for added security


The soft fork Taproot upgrade takes Bitcoin to another level and allows it to compete with many of the features that has made Ethereum so popular. Faster transactions, more privacy and security, and the ability to add smart contracts are compelling features that may help Bitcoin maintain its place as the standard in cryptocurrency.

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