This content originally appeared on DEV Community and was authored by ciro escarelli
The latest Bitcoin update enhances bitcoin privacy and performance, and improves overall network performance by reducing transaction costs. The present article does not intend to address the technical aspects of Taproot. The purpose of writing this article is to describe Taproot in simple and fluent language and to explain the importance of Taproot.
Why is it so important?
If we want to answer this question very briefly, we can say that Softfork Taproot improves the scalability, privacy and performance of smart bitcoin-related contracts. To do this, Taproot creates a new typed address in which all bitcoin transactions are viewed in a single form. That is, there is no longer a difference between a simple payment or a complex multi-signature transaction or a simple use of the Lightning network. Topprot addresses impose a lower transaction cost on the user than previous addresses. By "reducing transaction costs" and "converting all transactions into a simple single-signature transaction", Taproot allows bitcoin to perform more complex and larger operations. Operations that were completely impossible before.
Of course, if your approach to bitcoin is just a holding approach and you rarely move your bitcoins between different wallets, you might think that the Taproot update will not affect your life much. But this is not the case at all. Taproot actually provides the ground for large and significant developments. Developments that are likely to lead to the creation of more software forks for the Bitcoin network in the future.
For example, Taproot gives Lightning Network the ability to use its full potential to create technologies with adequate bitcoin scalability. Prior to Taproot, the second tier protocol was seen in the bitcoin blockchain, effectively reducing the exchangeability of coins, and it is clear to all of us that exchangeability is a vital element in exercising the role of money as a medium of exchange. Lack of interchangeability feature can mean that the same coins do not have the same value, and as a result, by performing a transaction, we reach a completely different output of our transaction input. As a result, recipients who receive output at different rates of input value face some form of discrimination, and little by little other users become less willing to use their bitcoin.
In addition to all this, Taproot allows Lightning Network and other complex wallets and contracts to increase their efficiency and reduce transaction costs, and their users can easily use Bitcoin as an exchange intermediary. With Ashnor's signature, the most complex transactions in the wallet covered by Taproot have the same transaction cost as the simplest transactions. This reduction in costs and the increase in flexibility and capacity to execute smart contracts lead to the formation of settings that we could not previously implement in the Bitcoin network.
To understand why Taproot updates are implemented in the Bitcoin network, we first need to understand how transactions in the Bitcoin network in general work and what changes have been made to them to date and how in this new-Taproot way. - Have we arrived?
How Bitcoin transactions work, from the beginning to today
In general, bitcoin-related transactions depend on inputs and outputs. Input and output are always the same; Because in the meantime, no coin is lost. At first, for example, if you wanted to send me five bitcoins, you had to choose exactly five bitcoins in your wallet. Otherwise, either the transaction would not be complete and your balance would be less than a certain amount, or your balance would be higher and you would not be able to choose "exactly" five coins.
Later, the concept of "change | change" came into use in Bitcoin, and from then on you could break your money. So, for example, if you want to send me five bitcoins and choose 7.38 bitcoins in your wallet; 2.38 The extra bitcoins will be returned to your account as the rest of the money. That means your input is 7.38 bitcoins and your output is 5 + 2.38 bitcoins. Of course, less than 2.38 bitcoins will be returned to your account; Because a small amount of it is deducted as transaction costs. So wherever we talk about spending, we are actually referring to an "output." I now have the five bitcoins you have given me and I can use them in any way I want. For example, I can give three bitcoins to the first person and two bitcoins to the second person. Or I can give five bitcoins to a third party. Or I can keep all these five bitcoins with me and hold them for as long as I want. Except for the last case, which is holding, in the other cases I am doing a "transaction". In each transaction I want to participate in these five bitcoins, the transaction input, five bitcoins and its output is the amount I want to send to the person. For example, if I want to send one or three bitcoins, I have to put all five bitcoins in the input, and after the transaction, my bitcoins become 3 + 2 bitcoins. I then send the three bitcoins to the other party and return the remaining two bitcoins to my account.
The purpose of these examples is to gain an understanding of bitcoin input and output. So when it is said that we are spending, we are actually transferring the output of one transaction to another person. To make this transfer, we need to put the initial output in a new transaction. This new transaction creates a secondary output and the receiver can receive this output. The concept of wallet was created to make the complexity of this transaction model easier to understand. This model is known as the UTXO model.
Improving the bitcoin transaction model
From 2008 until today, the payment history of the Bitcoin network has undergone many changes. In general, the UTXO model - described above - depends on the scripts and conventions written in the "programming" language of the Bitcoin script. I have coined the word "programming" to point out that the bitcoin scripting language can be more of a "verification language" than a language for performing computational instructions. So with the bitcoin script we can figure out a way to specify the cost of a UTXO.
When we look at the bitcoin script and the improvements that have been made to it, we come across three major limitations: privacy, space efficiency, and computational efficiency. Improving one of these three usually leads to improving the other two. For example, trying to reduce the disclosure of information about a transaction (the same as improving privacy) requires reducing the amount of data. Reducing the amount of data also means that we need less space to do transactions; And when the transaction space is reduced, the related calculations are performed with less compactness and the computational efficiency is higher.
To date, the bitcoin community has gradually introduced all the changes and developments that have been made to improve the performance of bitcoin scripts or new URLs. All these changes over time have been able to increase the privacy of transactions and make the transfer process more light, thus speeding up the transaction approval process. So users can more easily create scripts that increase the flexibility of their assets, as well as the security and efficiency of their transfers, and keep them out of financial control. Multi-signature URLs are a good example of the topic we discussed above. Until now, we had to manually do bitcoin multi-signature addresses; But now we can easily do it on our mobile phone or laptop. The same is true of Lightning. Lightning is the second-tier bitcoin scalability solution for regular and small payments. This second layer is now easily available in mobile applications, and any amount of bitcoin can be easily moved from anywhere to anywhere.
The most important update of the Bitcoin protocol
The latest and most important update to the Bitcoin-Taproot protocol is a natural revolution for bitcoin-related scripts and transactions. Taproot is made possible by Ashnor signatures, MAST and TapeScripts and seeks to increase flexibility and privacy; Without compromising network security.
Early in the advent of bitcoin, the sender of a transaction had to pay attention to the policies related to the destination wallet. This problem, in addition to making a transaction virtually impossible, inevitably led to a significant violation of privacy. In order to make a transaction, the details of the destination wallet had to be displayed, thus minimizing privacy.
With the advent of Pay to Script Hash (P2SH), the way Bitcoin is transferred has changed dramatically. In P2SH, instead of sending transactions to the contract itself, the contract is sent to the hash. With these interpretations, the details of a contract are no longer visible until the output of one transaction becomes the input of another transaction. With P2SH, all outputs become the same; That is, they are displayed only as a hash.
What is a hash?
The hash is actually the output of a hashing function. A variable of any length is converted to a fixed-length encrypted output when it enters the hashing function. This development not only managed to preserve the privacy of all bitcoin transactions by simulating all outputs (converting all outputs into one hash); It was able to significantly reduce the size of output variables and increase network performance in general.
However, when paying, all the details of the contract are revealed and everyone could see all the information about all the contracts. The two main negative aspects of this event are privacy and efficiency. In this way, any observer can observe the different conditions of spending and as a result, get countless information about the spender. In addition to the loss of privacy information, the entire blockchain network is replete with a huge mountain of useless information. The only benefit of this information is that it can be used to approve cost-appropriate spending conditions. Taproot Update improves this logic by using Merklelized Abstract Syntax Trees (MAST). The MAST structure allows Bitcoin to publish only the information required by the contract to achieve any specific purpose, leaving other information untouched.
Complex expenses in Taproot are done in two ways:
1) Agreement agreed with the conditions of mutual approval
2) Return contract in special circumstances.
For example, if a multi-signature address is available to multiple people and they want to use their inventory in a fully programmed manner; They can set the spending conditions in such a way that everyone agrees on them (mode 1) or they do not reach any kind of agreement and must use the return mode (mode two).
Once everyone has reached an agreement, Taproot can turn the process into a single signature address. As a result, the Bitcoin network is not at all aware that there was a multi-signature contract that has become a single-signature contract. This establishes the privacy of all users who use the same multi-signature address. However, if in the multi-signature state, the agreement state was not achievable and one of the members was using the return methods, Taproot only shows the transactions related to that return state and has nothing to do with other information.
So in a nutshell, with the introduction of P2SH, the recipient's privacy increased by unifying their output data (converting it to a hash), and now with the introduction of Taproot, the sender's privacy increases by restricting the information sent to the network. Even if you do not use complex wallet mode such as Multi-Signature or Lightning, your privacy will increase as the privacy of those users increases; This is because the new way of monitoring and spying on the chain becomes more difficult and the settings for anonymity in the bitcoin network increase.
What good is a web site if it simply "blends in" with everything else out there?
By reducing transaction costs, increasing efficiency and more privacy, Taproot can pave the way for more efficient bitcoin network performance. Nodes are being updated and people are starting to use URLs all the time. The more common this procedure becomes, the more difficult it is for blockchain network monitors to distinguish between transmitters and receivers. UTXOs are also treated in the same way. The expansion of the bitcoin network can also become a solid network for deploying complex future functions.
Second-tier protocols and side-chains can also help leverage and enhance complex smart contracts. As a result, over time, many contracts can be expected to build on the base layer. The end user does not need to create these themselves; Rather, it can easily take advantage of offers that are in the vast bitcoin ecosystem and are guaranteed by other members. Of course, some decentralized finance applications and their uses are already available on the Bitcoin network; But in any case, the advent of Taproot can lead to more complex and practical applications that have high security in the Bitcoin network. (Something none of the cryptocurrencies can compete with.)
Since bitcoin is practically a currency; As a result, long-term decentralized finance applications can be built on it naturally. Recent networks such as Ethereum do not have the monetary characteristics and security and strength of Bitcoin. (This is one of the reasons why the applications built on them lose their value in the long run.) By patiently building the foundation for distribution and having a network free of financial, exchange, and anti-censorship, Bitcoin can be used for Enjoy its long-term and multi-layered growth.
Taproot Update, which includes Ashnor, MAST and Tapescript; It is built on bases that are highly secure, protect more privacy, and have the potential to build more complex applications. The unparalleled flexibility of Bitcoin smart contract functions can usher in a new era of possibilities that we could not even think of before. This is the beginning of a path for more and more specific functions of the best monetary system that humanity has ever achieved.
Concluding remarks
In the long run, updates such as Taproot and Lightning can lead to redundant altcoins. If certain functions can be performed on Bitcoin - the world's strongest and most secure network - it is natural for this to happen. But altcoins create innovations and come up with applications that are like a lab for bitcoins (that is, the first changes are applied to the altcoins network, and after examining what happened, we can decide whether to apply these changes to the bitcoin network or not!) . Whenever real uses are found, we transfer them to Bitcoin. Those uses can also ensure that they are used for a long time and are constantly evolving.
This content originally appeared on DEV Community and was authored by ciro escarelli
ciro escarelli | Sciencx (2021-11-16T07:23:13+00:00) Peeling Bitcoin with Taproot. Retrieved from https://www.scien.cx/2021/11/16/peeling-bitcoin-with-taproot/
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