This is the first significant upgrade since the Segregated Witness , which eventually culminated in the development and launch of the Lightning Network in 2018.
While the previous SegWit upgrade was aimed to resolve transaction malleability and improve the scalability of the Bitcoin network, the Taproot upgrade is targeted to improve transaction efficiency, the privacy of the network, and its ability to support smart contract initiatives.
This tree will introduce a condition that will allow the sender and receiver of the transaction to sign off on a transaction together for settlement.
The downside to this is that it is very data-heavy, which is unnecessary, and it’s not ideal for privacy as anyone on the blockchain can investigate which ways the funds could’ve been spent, the kind of wallet being used, and possibly more of such details.
MAST ensures that the various conditions in which the funds can be spent are hashed individually and included in a Merkle Tree that will produce a Merkle root, which is a single hash.
This algorithm will allow users to aggregate multisigs into one for a single transaction, making it difficult to differentiate between regular transactions and multisig transactions.
Terrence also mentioned that the Taproot upgrade would have a compounding effect on the Lightning Network launched back in 2018.
Marie Tatibouet, the chief marketing officer at Gate.io, spoke with Cointelegraph about the larger impact that the Lightning Network has had already, especially in El Salvador’s adoption of Bitcoin as legal tender.
Even though the upgrade will allow the deployment of smart contracts and is the next logical upgrade for the Bitcoin network, it would be unrealistic to compete with the most utilized smart contract blockchain network, Ethereum, anytime soon.
Anto Bukov, the co-founder of 1inch Network, a decentralized cryptocurrency exchange, holds a more absolute view regarding smart contracts.
The asset currently has a market capitalization of over $1.2 trillion, holding over the coveted $1 trillion mark for nearly a week now.
However, the impact of this upgrade may already be priced into the asset’s current price.
Nonetheless, since Bitcoin is still under its fair value and a further surge this month is widely expected, Taproot might provide the impetus.
One differentiator from other blockchain networks that already have advanced smart contract utilities like Ethereum, Solana, etc., is that Bitcoin’s monetary functions and superior network security could attract liquidity that stays in the network for long periods.