Prices of the world’s largest cryptocurrency by value, Bitcoin, have surged after the announcement of its first upgrade in four years, with improvements planned to both the cryptocurrency’s privacy and efficiency.
“Bitcoin miners — those who secure the bitcoin network and validate transactions in return for bitcoin tokens — approved the long-awaited upgrade, known as taproot, that’s due to take effect in November,” reported Forbes. “Taproot, the most anticipated upgrade to the bitcoin protocol since segregated witness (SegWit) in 2017, is expected to improve bitcoin’s privacy and efficiency via a new signature scheme known as Schnorr that will replace bitcoin’s current elliptic curve digital signature algorithm (ECDSA).”
“Taproot is a very important upgrade that allows new levels of development hitherto impossible on bitcoin’s blockchain and further cements bitcoin’s position as the most relevant of all cryptocurrencies,” said Jason Deane, a bitcoin analyst for Quantum Economics. “In our view, the potential impact is probably not yet fully understood by the wider community, but this is likely to be become clearer over time.”
According to Forbes, cryptocurrency venture capitalist Nic Carter described Taproot as a “big landmark” which “demonstrates a new activation pathway which is apparently functional.”
“The technical change is important and warranted but to me, the most salient point is the fact that bitcoin governance and the upgrade process works,” Carter added.
Forbes also reported that Cory Klippsten, the chief executive of Swan Bitcoin, said that “Taproot adds important new functionality to the bitcoin protocol.”
“But perhaps more important is that its adoption was nearly unanimous,” Klippsten continued. “In the wake of the block size war of 2017, the smooth taproot upgrade is a demonstration of strong consensus about the direction of base layer protocol development.”
“Taproot matters, because it opens a breadth of opportunity for entrepreneurs interested in expanding bitcoin’s utility,” said Alyse Killeen, founder and managing partner of bitcoin-focused venture firm Stillmark, according to CNBC.
While Bitcoin currently uses “Elliptic Curve Digital Signature Algorithm,” which is “created from the private key which controls a bitcoin wallet and ensures that bitcoin can only be spent by the rightful owner,” Taproot will utilize “Schnorr signatures,” which “essentially makes multi-signature transactions unreadable,” CNBC added.
“The most important thing for Taproot is…smart contracts,” said CEO of cryptocurrency mining specialist Marathon Digital Holdings, Fred Thiel. “It’s already the primary driver of innovation on the ethereum network. Smart contracts essentially give you the opportunity to really build applications and businesses on the blockchain.”
The price of Bitcoin rose to more than $39,000 in reaction to the approval of Taproot. Prices also rose following SpaceX CEO Elon Musk’s announcement that Tesla would resume accepting Bitcoin as soon as the cryptocurrency relies on a more efficient and greener use of energy, as reported by The Daily Wire.
“This is inaccurate,” Musk tweeted in response to Wierzycka, who said, “What we have seen with Bitcoin is price manipulation by one very powerful and influential individual.”
“Tesla only sold ~10% of holdings to confirm BTC could be liquidated easily without moving market,” Musk continued. “When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions.”