With Taproot more privacy for Bitcoin

Taproot is said to increase the privacy of Bitcoin significantly. This approach relies on multi-signatures, to be precise, on Schnorr-Multisigs.

In the worries about price developments, ETFs and the Grabenk (r) ampf between Bitcoin and Bitcoin Cash one forgets, that Bitcoin develops also technically. Beyond these public debates, the developers have not only enabled Segregated Witness or advanced the Lightning Network. Things are working on things like Smart Contracts, Tokenized Assets or just the privacy on the Bitcoin Blockchain.

The latter is something very important. On the one hand, privacy is essentially one of the ideals of the Cypherpunks, and secondly, only through these can one increase the fungibility of Bitcoin. Bitcoin maximalists also have to admit that anonymity cryptocurrencies like Monero are currently in the lead here. Understandable that the Bitcoin community wants to catch up here.

Taproot is an idea that Gregory Maxwell introduced at the end of January in the Bitcoin developer mailing list. At the heart of the idea is the use of multi-signatures. We have briefly discussed multi-signatures in connection with Schnorr signatures. The idea is that transactions related to previously generated multisignatures on the blockchain look like other transactions.

The concept is quickly described: Say, Alice has the public key Pub_A and Bob the public key Pub_B. We can make a Mutisig C = Pub_A + Pub_B. From this and a timelock script a combined public key is generated. The Timelock script is primarily, similar to payment channels available to Alice and Bob, if their agreement breaks apart, after a set time again access to their funds. Alice and Bob can now form a 2/2 signature over P, that is, a multi-signature that requires approval from both. With this multisignature transactions can be initiated, in which one does not know whether Alice or Bob was behind it. Only the combined public key is stored on the blockchain.

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Such a development would not only improve the privacy of Alice and Bob. Similarly, the transaction history of a token on the bitcoin block chain would no longer be so transparent, which would be an important step forward in fungibility.

If Taproot is indeed the solution to a central problem of Bitcoin, the question arises: Why has not this solution been implemented yet? The problem is that Taproot requires Schnorr multisignature. Without Schnorr multi-signatures, you can not transform multiple keys into a single key. In that respect, Taproot is waiting for Schnorr.

Although it is progressing on this front. Since the beginning of July, various developers have been working on a Bitcoin improvement proposal for Schnorr signatures. Likewise, there are other project ideas such as Graftroot, MAST or SIGHASH_NOINPUT that require Schnorr signatures. Accordingly, one could hopefully say that this high demand for the new signature type would speed things up.

The problem, however, is the prioritization. Implementing all these ideas simultaneously is too complicated and risky. On the other hand, the various projects would each have a small soft fork and often result in a change in address format. Quite apart from the hurdles facing Bitcoin users, especially in the case of Taproot, privacy would at least initially go away.

You can see that the Bitcoin developer community is struggling with logistical rather than fundamental problems regarding Schnorr signatures. Although the developers are not known for quick decisions, partly because of security issues, partly because of difficulties in reaching a consensus, but there is a lot going on in the community, so it will be interesting to see when Schnorr, Taproot and the other projects become real.

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