Dado Ruvic | Reuters
The first bitcoin upgrade in four years has just been approved by miners around the world. It is a rare moment of consensus among stakeholders, and crypto experts tell CNBC it’s a pretty big deal for the world’s most popular cryptocurrency.
The upgrade is called Taproot, and it’s due to take effect in November. When it does, it will mean greater transaction privacy and efficiency – and crucially, it will unlock the potential for smart contracts, a key feature of its blockchain technology which eliminates middlemen from even the most complex transactions.
“Taproot matters, because it opens a breadth of opportunity for entrepreneurs interested in expanding bitcoin’s utility,” said Alyse Killeen, Founder and Managing Partner of bitcoin-focused venture firm Stillmark.
Unlike bitcoin’s 2017 upgrade – referred to as the “last civil war” because of the contentious ideological divide separating adherents – Taproot has near universal support, in part because these changes are fairly incremental improvements to the code.
Bitcoin’s makeover has to do with digital signatures, which you can think of as the fingerprint an individual leaves on every transaction they make.
Right now, the cryptocurrency uses something called the “Elliptic Curve Digital Signature Algorithm,” which is created from the private key which controls a bitcoin wallet and ensures that bitcoin can only be spent by the rightful owner. Taproot will switch over to something known as Schnorr signatures, which essentially makes multi-signature transactions unreadable, according to Alejandro De