Bitcoin is the original cryptocurrency, and consequently, carries the weight of both bullish or bearish cycles of the entire crypto market. When bitcoin is up, usually, the rest of the market follows, but when it’s down, altcoin’s value usually plummets as well.
In the past couple of weeks, we’ve seen the crypto market encounter some considerable bearish movement. The price of bitcoin dropped by 50% since its all-time high, dragging the rest of the market with it.
However, there seems to be one upcoming event that might flip this negative trend into positive momentum. If you haven’t heard it before, we are talking about the Bitcoin Taproot upgrade, that just got approved by the miners, and should go live in November 2021.
In this article, we will delve more into detail about this upgrade and see why it can influence the price in such a positive manner. To achieve this, we look at some bitcoin basics and how Taproot is supposed to improve upon them. Let’s get started.
What is Bitcoin?
Bitcoin is the first cryptocurrency to be released to the mainstream public. This peer-to-peer digital payment network was created to correct some of the flaws of our current financial system and provide a decentralized global currency.
The main advantage of bitcoin is that its issuance and usage are entirely independent of any governing body. As such, it provides financial inclusion to anyone with access to the internet.
Furthermore, Bitcoin allows for low remittance fees. Because it doesn’t need to use banks as an intermediary, Bitcoin’s transactions are much more cost and time-efficient than traditional money transfers.
Thanks to some of its properties, Bitcoin has spawned an entire industry, with thousands of other cryptocurrencies trying to mimic it. Thanks to this movement, users can today enjoy decentralized financial products and options trading like on Bitlevex.
However, there’s a big misconception about Bitcoin’s transactions. Because they require no identification, people assume that they are anonymous.
You see, every bitcoin transaction is recorded on a public, distributed ledger that is available all the time to anyone willing to consult it. This transparency makes BTC transactions pseudonymous, where governments or hackers can easily trace back the transaction information to the users involved.
While different privacy-focused coins have tried to solve this issue, Bitcoin’s transaction data remains public access. Or at least, until Taproot.
What is the Taproot upgrade?
The Taproot upgrade is the first major update of the bitcoin protocol in 4 years. This upgrade was just approved by the mining community and will take effect somewhere in November.
The main modification Taproot will apply to the Bitcoin protocol concerns transaction signatures. After Taproot, the protocol will enable something known as Schoor signatures. In a nutshell, these signatures will be able to conduct complex multi-sig transactions, without increasing in size.
Consequently, users will be able to program transactions similar to smart contracts on other networks. And finally, because the size of complex transactions will be reduced, this should allow for reduced fees on the network.
All in all, taproot will provide the much-needed privacy the Bitcoin network needs. With it, not only will transactions become faster and cheaper, but users will have the ability to obfuscate their data even further.
Important upgrades like Taproot are far and in between on the bitcoin network. While it has been approved, there needs a lot of testing to be done before the upgrade is finally implemented. With that said, this update might allow one last push for Bitcoin’s price in this cycle, with a 6-figure BTC remaining a possibility before the end of the year.