What is Taproot?

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  • Bitcoin’s Taproot protocol was introduced in 2021, and developers are finally making headway with it
  • The protocol was introduced in order to enhance privacy and usher in potential for smart contracts
  • What exactly is Taproot and how does it work?

Lightning Labs recently revealed that it is utilizing Taproot in order to bring more functionality to Bitcoin through its Lightning Network sidechain, including issuing stablecoins and certain DeFi applications. Taproot was birthed when the SegWit protocol was contentiously added to Bitcoin in 2017, causing the Bitcoin Cash hard fork, but it is only in more recent years that its capabilities have begun to be explored. In this piece, we take a quick look a what Taproot is and how it can help Bitcoin grow.

When Was Taproot Implemented?

The Taproot proposal was first introduced by Bitcoin developer Greg Maxwell in January 2018, with its formal proposal, defined in Bitcoin Improvement Proposal (BIP) 341, and its related BIPs 340 and 342, authored by Pieter Wuille, Jonas Nick, and Tim Ruffing. These BIPs laid out the technical framework for implementing Schnorr signatures, Tapscript, and Taproot itself.

The implementation process involved extensive review and testing within the Bitcoin developer community, ensuring that the upgrade would not compromise the network’s security. After achieving broad consensus, Taproot was activated on the Bitcoin network on November 14, 2021, at block height 709,632. This activation followed a Speedy Trial soft fork deployment method, which provided a clear activation pathway and timeline for the upgrade.

How Does Taproot Work?

Taproot is a significant upgrade to the Bitcoin network, designed to enhance privacy, efficiency, and smart contract functionality. Traditionally, complex Bitcoin transactions, such as those involving multi-signature addresses or the Lightning Network, reveal more information on the blockchain compared to simple transactions.

With Taproot, all transactions look the same on the blockchain, regardless of their complexity. This is achieved through a concept called MAST (Merkelized Abstract Syntax Tree), which allows only the executed branch of a smart contract to be revealed, hiding other conditions that were not triggered.

Schnorr signatures, another critical component of Taproot, replace Bitcoin’s previous elliptic curve digital signature algorithm (ECDSA). Schnorr signatures are more efficient and allow for signature aggregation. This means multiple signatures can be combined into one, reducing the size of transactions and thus lowering fees. Moreover, Schnorr signatures enhance security by making certain types of attacks more difficult to execute.

What Can Taproot Do?

The flexibility of Tapscript enables more complex smart contracts to be written and executed efficiently, paving the way for more advanced features and applications to be built on the Bitcoin network, potentially expanding its use cases beyond simple value transfer.

Taproot enables stealth addresses and confidential transactions for better privacy, and advanced multi-signature wallets and threshold signatures for efficiency. Moreover, developers can use it to support complex DeFi applications, improved atomic swaps, and scalable payment solutions like the Lightning Network. It also facilitates the creation of DAOs with efficient voting, trustless escrow services, Bitcoin-based NFTs, and enhanced security features like secure timelocks and vaults.

Taproot could even support decentralized identity and authentication solutions, providing users control over their identity information without relying on centralized entities.


In summary, Taproot is a pivotal upgrade that enhances Bitcoin’s privacy, efficiency, and functionality. The introduction of Schnorr signatures reduces transaction sizes and fees while improving security, while Taproot’s advanced scripting capabilities open the door to more sophisticated smart contracts, potentially broadening Bitcoin’s application spectrum.

Despite its benefits, Taproot faces criticism. The added complexity from Schnorr signatures and Tapscript increases the risk of bugs and vulnerabilities, and it doesn’t significantly improve privacy for simple transactions, which remain identifiable. Additionally, the implementation of such a significant upgrade carries inherent risks, and achieving consensus within the Bitcoin community can be challenging and slow, with differing opinions on the changes.