Taproot, a privacy and scalability upgrade Bitcoin developers have long been drooling over, finally activated last weekend.
Nonetheless, they are an important type of upgrade that has repercussions for many projects building on top of Bitcoin, iteratively improving functionality of the open source digital currency.
But even if some exchanges and wallets have yet to adopt Taproot, some like BitGo and Blockstream Green have been speedier, and more than 50 percent of nodes supporting Bitcoin are running the upgraded software.
In short, it allows a new type of signing option when signing a transaction, allowing a user to sign a transaction without adding a specific output – at least not right away.
Similar to losing a bitcoin private key, if users lose this data they might not be able to get their funds back.
Covenants are a proposed change to Bitcoin’s code that would restrict where a user can send their funds.
Covenants make it easier to implement “vaults,” where users can still get their funds back even if a thief tries to run off with them.
These sidechains can have new and experimental technologies that Bitcoin doesn’t have yet – such as adding zk-SNARKs functionality similar to the privacy coin zcash, allowing users much more privacy than bitcoin offers.
Drivechains are a more controversial proposal, though, because some developers argue they could hand miners more power.
When a user wants to send some bitcoin, they must use their private key to “sign” coins, proving that they own their bitcoins, allowing them to send the bitcoins to someone else.
Using wallets like Wasabi and Samourai, CoinJoins are a method of boosting a user’s privacy by combining a number of user’s coins together into one transaction and “mixing” them, so that it is difficult to tell where any of the coins came from.
All of the signatures in the transaction can be mashed together, reducing the cost of the CoinJoin transaction.
They will want to exiting customer transactions with lots of other transactions to save money, and the side-effect will be more privacy for the rest of that transaction!” as Jimmy Song put it in his Bitcoin Tech Talk newsletter.
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