Bitcoin Update: Taproot and Schnorr Signatures

Taproot and Schnorr signatures – Coming soon updates to improve the privacy and scalability of the Bitcoin network.

The privacy and scaling updates of Taproot and Schnorr signatures have made significant progress recently, moving from theoretical idea to real code. These updates combine several different technologies that have been offered over the years, and each of them is technically and conceptually unique.

First, these updates include the Merklized Abstract Syntax Trees (MAST), which smart contract technology developers discuss since 2013. The update also includes Schnorr signature technology, proposed in 2015 by developer Pieter Wuille, and Taproot, a privacy technology proposed in 2018 by Greg Maxwell.

Privacy and scaling are what Bitcoin still lacks. Despite the need for these changes, massive updates are difficult to implement in Bitcoin due to the large number of independent users, miners and services scattered around the world. One of the thorny issues is the need to reach agreement on what exactly will be included in the update.

“I think the biggest challenge in this process is creating an accurate set of features for simultaneous deployment,” said Blockstream researcher Tim Ruffing.

Scope of the update

First, it’s worth remembering that this update is not a magic pill that will instantly turn Bitcoin into a super-scalable and private cryptocurrency.

However, the update will improve the network in several ways at once. First, more complex transaction types will become easier to use. In a typical transaction, one person signs it, thus proving that he owns the BTC and is entitled to send it. On the other hand, multi-signature transactions require multiple signatures. This update will simplify these transactions.

“It is likely that more wallets will support multisig because it will get cheaper and more private with Taproot,” said Blockstream researcher Jonas Nick.

Multisignature technology has many important use cases. First, the Lightning Network, which relies on multi-signatures, has the potential to accelerate and scale payments for Bitcoin. If Lightning does prove to be the future of Bitcoin, as some enthusiasts speculate, this improvement could have a big impact, making transactions much cheaper.

In addition, multi-signature transactions using the new technology will look the same as regular transactions. Thus, even though the Bitcoin blockchain is open, where anyone can easily find a specific transaction, with this technology, observers will not know exactly which transactions are being made using Lightning Channels.

“Opening and closing Lightning channels will be indistinguishable from regular payments. It also means that opening the Lightning Channel will cost the same as a regular transaction, ”Nick said.

Schnorr Signatures – Improving Efficiency

Understanding the essence of these updates requires some understanding of how Bitcoin works. Only with the correct private key can the transaction be signed, thereby sending bitcoins. This process creates a signature that is attached to the transaction.

Sometimes it takes more than one person to sign a transaction. When such a multisignature transaction is signed using ECDSA (the current Bitcoin signature method), it creates a separate signature for each wallet. However, this can be avoided – using Schnorr signatures, you can combine all this data into one signature through key aggregation.

how отмечает Bitcoin Optech, Consolidation will help reduce the size of this type of BTC transactions by 30% – 75%. Scaling technologies like these are important because downloading the full blockchain is the safest and least trust-minimizing way to use Bitcoin. However, now this requires more than 300 gigabytes of free space and patience – downloading and processing the entire database takes from several hours to several days.

Schnorr signatures will also enable what is known as “batch verification”, which allows multiple signatures to be validated at once.

Developers have long suggested using “signature input cross aggregation” to embed Schnorr signatures in bitcoin transactions. Typically, more than one signature is required for each transaction – one for each “input”. That being said, Schnorr signatures could theoretically compress all of these signatures together for every transaction.

But the implementation of this feature will have to wait, as the developers are still working on some security issues that do not yet allow this feature to be added to Bitcoin. However, with the addition of Schnorr signatures, this functionality will be one step closer to implementation.

“This could be implemented in a future update,” said Ruffing.

MAST: improved smart contracts

Although Merklized Abstract Syntax Trees (MAST) did not make it into the title of the update, it is an interesting technology that developers have been discussing for a long time.

To understand how MAST works, you can imagine a situation where a user wants to simultaneously implement two conditions when sending a transaction: add multisignatures, and also schedule the transfer of BTC at a specific date and time. Now, when one of these scripts is executed, a complete script is added to the transaction, taking up a lot of space and showing the world what conditions the user applied.

MAST implements these conditions in a new way that looks like a tree. Each branch of the tree contains different conditions that the user must fulfill in order to spend bitcoin. Then, only the top of the tree hash is included in the Bitcoin blockchain instead of all scenario conditions.

Taproot – Enhanced Privacy

Taproot relies on MAST and Schnorr signatures to create confidential smart contracts. As a rule, now transactions with complex scenarios using MAST stand out strongly on the blockchain. Even though the MASTs themselves are more confidential, the format of these transactions is slightly different, so it is easy to tell if a script is being used or not.

Using the signature aggregation that Schnorr signatures provide, Taproot makes these transactions look like regular transactions. However, this does not work for every MAST contract, only for shared costs, where one branch of the Merkle tree is a multisignature transaction that is used successfully. If any other branches are used, the privacy advantage disappears. However, developers expect the co-spending option to be the most common.

In addition, there is Tapscript to help facilitate further scripting enhancements.

“While the changes to BIP Tapscript do not immediately benefit the average Bitcoin user, they are intended to make it easier to update the scripting system in the future,” Nick said.

The developers are now actively testing this package of new technologies. So far, no major issues have been identified, but the developers continue to test the update before adding it to Bitcoin via a soft fork.

“More recently, we have proposed a few small changes to make the Schnorr signature mechanism more resilient to implementation errors and physical attacks,” Nick said.

As developers create and extend Bitcoin technologies, it is changes like Taproot and Schnorr signatures that could make the platform more complete for developers and finance professionals.