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SegWit

Bitcoin [BTC] Taproot Activation Is Its First Major Upgrade In 4 Yrs

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The highly anticipated technological upgrade of Bitcoin- the activation of Taproot has finally started. Bitcoin Core version 0.21.1 is now available for download. According to the document published by Bitcoin Core, an open-source project which maintains and releases Bitcoin client software, the miner block templates generated by this version of BTC will indicate readiness to execute taproot during the roughly three-month period specified by BIP341.

The document also read,

“If, during that time, 90% of blocks within a 2,016 retarget period signal readiness, taproot will be locked in and this version of Bitcoin Core will begin enforcing the additional consensus rules specified in BIPs 341 and 342 at block 709,632, which is expected in early or mid-November.”

Bitcoin’s difficulty adjustment on the 1st of May launched the first phase of activation for one of the biggest upgrades on its network after SegWit. This essentially means that the miners in the network who wants to adopt the upgrade can express their support by including special data in the blocks they mine called a “signal bit” starting from 1st of May.

If at least 90% of the blocks mined during this difficulty period of Bitcoin then the Teproot upgrade is “locked in” for activation in November 2021.

However, if the Bitcoin miners fail to lock in the upgrade by the end of the three month signaling period, a separate effort to activate it with the help of yet another mechanism would be rolled out.

The activation mechanism has been mapped out carefully. It has been designed meticulously so that, by nearly mid-August, it will either provide the participants with a guarantee that they will soon have Taproot or immediately give them important information that users and devs can leverage to make the next activation attempt more likely to succeed.

Significance of Bitcoin’s Taproot

Taproot is essentially a soft fork that enhances Bitcoin scripts. The main objective of this upgrade is not only to increase privacy but revamp other aspects related to complex transactions.

Transactions on the Bitcoin network are pseudonymous in nature. It may utilize several functionalities that make them more complex. This includes multi-signature requirements, timelock releases, etc. With Taproot out of the question, it can be easy to determine transactions that leverage these complex features by the means of creation of multiple transactions.

On the other hand, with this upgrade, Bitcoin will be able to shield those moving parts in its transactions and make it appear to be a single transaction.

First proposed by BTC Core contributor and ex-Blockstream CTO Gregory Maxwell, Taproot is expected to augment on the crypto-asset’s smart contract flexibility, while at the same time offering more privacy.

Litecoin’s SegWit Usage Hits 80%, Bitcoin Trails Behind

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Among other blockchain upgrades, Segregated Witness [SegWit] has been one of the most popular protocols whose narrative revolved around altering the block size limit by removing signature data from the transaction.This allowed addresses to both decrease the size and cost of individual transactions while increasing the maximum block size to more than 1 MB. The Litecoin Network successfully activated the long-debated Mainnet protocol in May 2017.

More than three years later, Litecoin’s SegWit usage has reached 80%, according to the latest data from Blockchair.

Litecoin

Despite hitting a few lows, Litecoin’s SegWit usage has been steadily increasing over the last three years. This has further resulted in a substantial decline in the network’s transaction fees. Notably, the figures for the transaction fee witnessed a major fall in April this year and has been consistent ever since.

A quick primer: For SegWit activation, Litecoin needed 75% approval while Bitcoin required 95% support from network miners. The latter could not acquire the initial support. Litecoin, on the other hand, owing to the lower threshold, could activate the technology. This opened an opportunity for the naysayers in the Bitcoin community to understand how activation may work on the network.

After initial hesitation, a few months later, SegWit was implemented in Bitcoin too. But the rate of adoption rate and use have been slower than Litecoin. At the time of writing Bitcoin’s SegWit usage stood at 54%.

Commenting on the usage rate of the protocol on both Litecoin and Bitcoin, Charlie Lee, Managing Director of Litecoin Foundation tweeted,

“Litecoin SegWit usage has reached 80%, whereas Bitcoin is only at 50%. This is mainly because Blockchain.com still has not implemented SegWit.”

Luxembourg-based cryptocurrency exchange Bitstamp had earlier noted the potential for SegWit adoption to grow on the Bitcoin network, which has this year been showing growing signs of congestion, in its recent report.

It was in 2019 when Bitcoin’s SegWit usage gained traction. More blocks over 1MB have been mined during the same year than all of 2018.

After nearly seven months of low transaction fees on the Bitcoin network, starting from October 2019 to April, the figures appeared to have sprung up once again which coincided with its price movements. However, this wasn’t the case with Litecoin. Despite the recent surge in its value, the transaction fees continued to be low.

SegWit’s low adoption by Bitcoin network participants isn’t entirely because of the protocol being optional in nature. One of the few reasons for the reluctance in the implementation was also because of the miners using AsicBoost firmware. While this was incompatible with SegWit, the firmware allegedly helped the Bitcoin miners to verify transactions up to 20% faster.