Updated Bitcoin: The 3 Changes (Simply Explained)

It will take some time to measure the changes, but the process is underway. On November 14, Bitcoin opened for its biggest update since 2017. The blockchain behind the world’s first cryptocurrency is also the subject of “hard fork” and “soft fork” updates. Although they are less popular than Ethereum today, they are still very important.

In decentralized finance (DeFi) and “smart contracts”, the update called “Taproot” will be very relevant. Also in terms of speculation, all eyes are on the digital token. In 2017, during the latest “SegWit” update, Bitcoin had gone from 4,000 to more than $ 20,000 in four months. Currently, the cryptocurrency is up 2.03% to $ 65,435 (price at 10:10 a.m. KST) from its all-time highs.

Good to know : Bitcoin updates? And yes, Blockchains and the cryptocurrencies that result from them can be decentralized and very secure, however they are subject – in terms of software – to updates to their code to continue innovating and improving. Like Ethereum (which is heading towards ETH 2.0, its biggest update), Bitcoin is also far from static and hundreds of developers are constantly working near or far on many improvements.

Bitcoin: what changes explained simply

1 / Smart contracts

Bitcoin is not a benchmark for smart contracts. Its cryptocurrency has never been in the limelight for its place in DeFi, which is almost non-existent and was left to Ethereum. With Taproot, Bitcoin is getting better on this side of crypto. Digital deals that are stored on the Blockchain and that are at the heart of any decentralized financial project (including NFT) will be easier and more numerous to register on the Bitcoin blockchain thanks to changes made with Schnorr signatures.

This new wording of contract signatures will make it possible to make “space” in transactions (up to 75% more efficient with the space they occupy with a validation of their authenticity 2.5 times faster). Old signatures called ECDSA (Elliptic Curve Digital Signature Algorithm) severely hampered Bitcoin’s ability to handle more transactions. “The ECDSA method, due to its rigid structure, is not ideal for more innovative transaction constructions than the integration of smart contracts (smart contracts) in Bitcoin,” explained a Cryptonews journalist.

Why not have included the Schnoor signing process from the beginning? The answer is very simple and refers to a patent. Claus-Peter Schnorr, who invented the code behind these more streamlined signatures, had filed a patent to protect it. The latter expired in 2008 and Satoshi Nakamoto, the mysterious creator of Bitcoin, did not want to wait to launch his Blockchain and therefore preferred to integrate the ECDSA process.

2 / Confidentiality

The arrival of these Schnoor signatures does not mean that it is easier to create smart contracts on the Bitcoin Blockchain. From now on, multi-signature transactions will no longer be as easy to distinguish from single-signature transactions, making them much more confidential. It will be even more difficult to know who is responsible for a transaction and many are concerned that the authorities will point the finger at this change.

In the Bitcoin Blockchain, single signature transactions are materialized by the signature of the sole owner of the private key associated with a wallet. But there are also more complex transactions, with the signature of several keys / several machines. Other blockchains are much more optimized than Bitcoin at this point, but now the flagship cryptocurrency is also starting to indiscriminately adopt these multi-signature transactions. Furthermore, Schnoor firms no longer limit the number of 15 signatories in a transaction, as was the case with the ECDSA process.

Good to know : While multi-signature transactions may seem more difficult to track and motivate illegal activity, they are also a great way to make wallets even more secure. In fact, it is much more difficult for a hacker to steal multiple security keys rather than just one (multi-signature wallet). Also, the loss of one of the keys does not result in the loss of the wallet (because the other keys can be used to recover the funds).

3 / Lower transaction fees

In Bitcoin Blockchain, reducing transaction costs is not as urgent as in Ethereum. But with the Taproot update, it will cost even less. Schnoor signatures, which improve multi-signature transactions, will require fewer resources to process and the consequences are direct for users. “With less data involved, transactions will be more energy and time efficient,” said Tyrone Ross, CEO of Onramp Invest.

In short, the Taproot update can be preserved as the completion of the Schnorr signature integration on the Bitcoin Blockchain. Schnorr signatures have been talked about for a long time and December 2019 marked the end of reviews for its implementation. But we still had to rely on a “soft fork” for integration into the Bitcoin software. This is happening today and the biggest breakthrough concerns the facilitation of smart contract creation. In general, transactions will also be cheaper and will pave the way for multi-signature wallets, which are much more secure.

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