Taproot is on its way. The long-awaited Bitcoin (BTC) upgrade has been confirmed, after it passed the minimum threshold of 90% miner approval in mid-June, meaning that it will be implemented in November.
While the core features of Taproot — increased privacy and enhanced wallet scripting — are fairly well-known, what will the upgrade’s impact be on Bitcoin in a wider sense? Will it attract more adoption, take users away from privacy coins, or even incur the wrath of regulators?
The answers to these questions are fairly mixed, according to a range of Bitcoin developers. Because while Taproot’s features might attract greater use of Bitcoin, it may also take a while before applications and Bitcoin-based services make full use of them, with protocols having to be built on top of Bitcoin before cost-saving and privacy features have a significant impact.
What Taproot does for Bitcoin
As a recap, here are the three main benefits Taproot will bring to Bitcoin:
Reduced fees for multisig/complex transactions: Taproot will significantly reduce the data needed for processing complex transactions, such as those involving multiple signatures or time-locking. This is great for anyone who needs greater security.Increased privacy: in combination with Schnorr signatures, Taproot will let users mix transactions made by complex (e.g. multisig or time-locking) wallets with those using only single signatures. It will therefore let anyone concerned about revealing their use of multisig to hide such use. Enhanced wallet functionality: Taproot will let developers set more complex conditions for wallets. For example, it will let developers create multisig wallets which start off by requiring 3 out of 5 signatures to confirm transactions, but which can degrade over a set period of time to require only 2 out of 5 signatures. This is ideal if you anticipate the possibility of losing any of your private keys.
These are the core features offered by Taproot. And pretty much every developer Cryptonews.com spoke with agreed that such features will be widely used, but not immediately.
“I expect the features enabled by Taproot will be used very widely once downstream applications integrate them, as they will help the applications provide valuable features, procure competitive advantage and lower costs,” said one Bitcoin developer, who asked to remain anonymous.
Other developers agree that we’ll need to wait for applications, wallets and protocols to implement Taproot before its beneficial effects will fully make themselves known. For developer and BTC wallet service BTCPay Server founder Nicolas Dorier, it’s unlikely that adoption for Taproot will be as wide as it was for SegWit, particularly for users requiring only single-signature payments.
“It will be widely used for other protocols built on top of Bitcoin (like Lightning). On-chain, Taproot makes the use of these protocols indistinguishable from other protocols. Multisig benefits from such kinds of enhancement will follow for sure, but will current multisig wallets move to Taproot?,” he asked, adding that the answer to this question is not clear yet.
“Taking advantage of the privacy upside requires some more complex protocol (musig2) to be able to work,” he said, noting that it might not be worth the trouble for current multisig wallets.
For Bitcoin author/educator/developer Jimmy Song, multisig wallets will gradually integrate Taproot, but again not immediately.
“Not much at first, but much more over time. There is demand for good backup solutions, so yes, I think wallets will be integrating them,” he told Cryptonews.com.
Effects on competition
The question is: will the integration of Taproot’s capabilities make a real difference to Bitcoin’s value proposition? Well, the answer to this question depends on your priorities.
“I expect it’ll attract people that actually understand the value of security. People playing with altcoins are concerned with token appreciation, not self-sovereignty so I suspect people like that won’t be too interested in Taproot,” said Jimmy Song, who suspects that another long bear market may convert more people to Bitcoin.
Nicolas Dorier noted that Taproot won’t actually reduce fees for the vast majority of Bitcoin users, who tend to use single signature wallets and transactions. However, he is open to the possibility that it may widen adoption in the longer term.
“I don’t think Taproot by itself will bring more people to Bitcoin. The perceived value will come from the protocols that can be built on top of it, and it is difficult to predict if there will be some new protocol as popular as Lightning coming,” he said.
Dorier also opined that Taproot won’t have a major impact on privacy in the short- or medium-term.
“I would say, until it gets widely used for protocols on top of Bitcoin, it may even impact negatively by making Taproot transactions stand out from the crowd. This is temporary,” he said.
In other words, it would be somewhat naive to think that Taproot will help Bitcoin attract users away from other coins — including privacy coins, such as monero (XMR) — in the months following its release. Rather, it may possibly take much longer for its advantages to have competitive ramifications.
Will regulators like Taproot?
By extension, it’s unlikely that Taproot will attract scrutiny from regulators, or cause such regulators to come down harder on Bitcoin.
“I don’t see this getting much attention from governments. Cross-input Signature Aggregation might, but that’s at least another soft fork away,” said Jimmy Song.
Nicolas Dorier largely agrees with this assessment, if only because the use of complex wallets remains fairly low.
“I don’t expect any move from regulators,” he said. “People trying to protect their privacy on Bitcoin already have numerous means to do so, and Taproot’s ability to improve this is at best marginal.”
Still, while Taproot’s immediate impact will remain slight, it certainly is the most significant Bitcoin upgrade since SegWit. Because in the longer term, it will provide Bitcoin users with greater security and privacy._____Learn more: – Taproot, CoinSwap, Mercury Wallet, and the State of Bitcoin Privacy in 2021- El Salvador Will Be a Serious Test for Bitcoin’s Layer-2 Networks
– Solving These 7 Challenges Would Accelerate Bitcoin Adoption- The BTC-Colonial Pipeline FUD Gives A Lesson On Bitcoin Security
– As Bitcoin’s Taproot Nears, Ex-CIA Director’s Paper Raises Privacy Concerns- What And How ‘Slow’ Bitcoin Wins In The Storm Of Crypto Innovations
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