Since bitcoin’s inception, the mechanism for spending bitcoin has evolved numerous times. Taproot is the most recent enhancement to how bitcoin transactions work, and it provides significant benefits to bitcoiners.

Merits of Bitcoin’s Taproot

Reduced Transaction Fees

The transaction data size for complex bitcoin transactions has been significantly reduced. This means that the transaction fees for using more complex bitcoin wallet features such as multi-sig or time-locking will be reduced considerably. Sending a transaction from your bitcoin multisig wallet will be much cheaper.

Enhanced Privacy

Bitcoin wallets with more complex spending conditions, such as a multi-sig wallet or one that uses time-locking, will no longer be distinguishable from straightforward single signature wallets with Taproot and Schnorr signatures unless they spend the funds using their uncooperative spending conditions. From the standpoint of on-chain analytics, this will allow more complex wallets to “blend in” better.

More Wallet Features

Development teams can concentrate on creating vaulting logic that is more resistant to permanent loss by utilizing multiple time-locked redemption conditions. For example, if no funds are moved from it, you could create 3 of 5 multi-sig wallets that “gracefully degrades” to 2 of 5 wallets after five years. This would generally allow you to recover your bitcoin even if three of your five keys were lost! In this case, the privacy benefit of Taproot is critical – you wouldn’t want someone else to know that this is how your wallet is configured solely by looking at your on-chain statistics.

How Does Taproot Function?

Bitcoin’s scripting language could appear simple and limited, but it provides a surprising amount of functionality. It supports everything from straightforward single-signature wallets to complex multi-signature, hash time-locked contracts, such as those used to power the Lightning Network. However, using these more complex bitcoin contracts has historically been costly.

If you wish to use a complex bitcoin script before Taproot, you had to post the entire script inside each transaction input when spending funds. As a result, such transactions took up a lot of blockchain space and were costly to execute.

Taproot, on the other hand, uses a structure known as Merkelized Abstract Syntax Trees to partition the execution of complex bitcoin scripts, allowing you only to reveal the parts of a script that are executed.

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