The consensus rules of the Bitcoin code are about to change

How can we improve Bitcoin in 2020? What do those who develop the protocol think and what changes can be implemented in the code.

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1 Schnorr / Taproot / Tapscript

2 Soft Fork – Taproot

2.1 Related posts:

The following article is based on the information presented by Aaron Van Wirdum (2020 and Beyond: Bitcoin’s Potential Protocol Upgrades) published in Bitcoin Magazine. The additions and additions based on the information presented were made by the Concorde Blockchain Security team.

The consensus rules of the Bitcoin code have remained unchanged since 2017. Since the advent of Segwit in August 2017, we can say that it has not encountered any Hard Fork or Soft Fork in the Bitcoin protocol. It is the longest period without modifications, or in other words “without forks”

Hard Fork : A hard fork intervenes when, by implementing a new code, 2 different versions of the same blockchain running in parallel are created. Those running on the old version of the blockchain must run the new software variant to follow the consensus of the new blockchain created.
Soft Fork: A soft fork intervenes when, by implementing a new code, the blockchain version remains unchanged, being at the discretion of the users the option to run the new code (with the new options) or not.

The period in which the consensus rules of the Bitcoin code have remained unchanged is likely to come to an end. If we look optimistically, some of the implementations we will be discussing today will be present in Bitcoin, perhaps as early as 2020, if the community adopts them.

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Of course, we’re talking about some consistent upgrades that will add value to the bitcoin protocol over the next few years.

Schnorr / Taproot / Tapscript

Schnorr signatures are considered by most cryptographers to be the best cryptographic signatures in the field. It offers a very high level of correctness, they cannot be defrauded or modified, they are quite quick to verify and, most interested, allow their integration in mathematical operations.

How does this help us in the case of Bitcoin? Using Schnorr signatures, multiple signatures can be combined into one, which can incentivize the use of CoinJoin transactions.

CoinJoin transactions, using the pooling of signatures of all participants in one (through Schnorr), decrease the overall size of the transaction resulting in a lower tax paid to the miners.
Here’s how, using Schnorr, we will have lower CoinJoin transactions (anonymity) and implicitly, lower fees.

Another great advantage as I said above, is the possibility to benefit from mathematical operations on Schnorr signatures. These can be viewed as “smart contracts” directly on Bitcoin. The problem of decentralized exchanges or insurance contracts can be very easily solved. Those who monitor transactions will not be able to identify more than normal transactions on the bitcoin blockchain even though they are smart contracts.

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Adding Schnorr signatures is a much-discussed upgrade in Bitcoin developer communities. However, lead developers Pieter Wuille, Jonas Nick and Anthony Towns have even revealed more daring and advanced plans. Schnorr signatures can be proposed along with other options, in a soft fork called Taproot, proposed by Gregory Maxwell. It was inspired by an older proposal called MAST (Merkelized Abstract Syntax Tree). The MAST proposal would improve both Bitcoin’s flexibility and scalability and anonymity.

Soft Fork – Taproot

Divisions in a Bitcoin can be “blocked” in such a way that they can only be spent under certain conditions (EX: blocking up to a certain number of the block, secret numbers chosen by the participants that allow the spending, etc.). With MAST, all of these conditions are subject to a cryptographic function and included in a Merkle Tree (a compact data structure). The coins are locked in the final hash of the Merkle-tree, resulting in Merkle root (Merkle root). To spend the coins, a participant only has to reveal the method used to unlock the coins. The other methods by which the coins could have been spent remain hidden, with no participant having the opportunity to reveal them.

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Therefore, Taproot is based on an interesting achievement. No matter how complex a MAST-type contraction, this includes a condition that allows all participants to reach a consensus and sign for a transaction. This consensus can replace and override any other individual condition.

With Taproot it is easier to carry out a similar process. Using the Schnorr signatures, the transaction resulted by the consensus signature shows that any normal transaction in the network. In other words, a MAST-type build is completely hidden from other users (to them it looks like a normal spend transaction), which increases efficiency and anonymity.

Taproot can also bring a new version of the Bitcoin programming language (script), called Tapscript, which can facilitate the addition of new options (OP codes) in Bitcoin.

For more details on Taproot, we recommend the article (Engl).

To be continued…
In the following articles we will talk about: