The first upgrade of bitcoin after 4 years has just been approved by “miners” around the world. It’s a rare moment of consensus among those involved, and cryptocurrency experts are commenting on CNBC that it’s a big deal for the world’s most popular cryptocurrency.
The upgrade is called Taproot and will take effect in November. When that happens, it will mean greater privacy and transaction efficiency – and most importantly, it will “unlock” the ability for smart contracts, a key feature of blockchain technology that eliminates intermediaries in even the most complex transactions.
“Taproot is important because it opens up a range of opportunities for entrepreneurs interested in expanding the usefulness of bitcoin,” said Alyse Killeen, founder of bitcoin-based investment firm, Stillmark.
In contrast to the bitcoin upgrade in 2017 – referred to as the “last civil war” due to the controversial ideological division that separates followers – Taproot has almost universal support, because these changes are gradually increasing improvements in the code.
Bitcoin makeover has to do with digital signatures, which you can think of as the fingerprint a person leaves on every transaction they make.
Currently, cryptocurrency uses something called the “elliptic curve digital signature algorithm“, which is created by the private key that controls a bitcoin wallet and ensures that bitcoin can only be spent by the rightful owner. The Taproot upgrade will be a transition to what is known as the Schnorr signature, which effectively makes multi-signature trading unreadable, according to Alejandro De La Torre, vice president of Hong Kong-based Poolin.