The Bitcoin upgrade for the first time in four years has just been approved by miners around the world.
“Taproot is important because it offers a wide range of opportunities for entrepreneurs interested in expanding the usefulness of Bitcoin,” said Alyse Killeen, founder and managing partner of Bitcoin-focused venture company Stillmark.
According to Alejandro De La Torre, vice president of Hong Kong-based major mining pool Poolin, Taproot will switch to what is called a Schnorr signature.
In reality, it means that privacy is improved because the keys are less exposed on the chain.
These enhanced signatures are also game changers for smart contracts, which are self-contained contracts that exist on the blockchain.
Today, smart contracts can be created both at Bitcoin’s core protocol layer and at Lightning Network, a payment platform built on Bitcoin.
“The most important thing for Taproot is … smart contracts,” said Fred Thiel, CEO of Marathon Digital Holdings, a cryptocurrency mining specialist.
As more programmers build smart contracts on top of Bitcoin’s blockchain, Bitcoin’s decentralized finance is used to describe DeFi, a financial application designed to eliminate intermediaries.
“The upgrade makes the system much less likely to get bugs, loses the trust of the entire cryptocurrency system and effectively wipes it out.