Why the first cryptocurrency barely reacted to the largest network upgrade in four years and what to expect from the coin in the short term
On the morning of November 14, the largest Taproot updаte in four years was activated on the Bitcoin network on block 709,632, proposed by Bitcoin Core developer and Blockstream co-founder Gregory Maxwell in 2018. The updаte aims to improve the scalability, privacy and efficiency of the bitcoin network.
What is Taproot
Prior to Taproot’s release, the Segregated Witness (SegWit) softfork, which was activated in late August 2017, was considered the largest updаte to the bitcoin network. Thanks to SegWit, the network of the first cryptocurrency reduced transaction fees and increased block size.
The Taproot updаte is also designed to reduce the amount of commissions in the bitcoin network by introducing multi-signature technology and implementing the Schnorr scheme. Prior to the latest updаte, the first cryptocurrency used digital signatures based on the ECDSA cryptographic scheme. After Taproot’s release, transactions will be able to receive multiple signatures and form a single signature from them. The fees for multi-signature transactions are expected to be lower because less data is needed to validate them.
After the Taproot updаte, the first cryptocurrency network is now able to create complex smart contracts thanks to the integration of the MAST concept. The technology allows to generate separate hashes for each spending condition. Smart contracts are represented in the blockchain as regular transactions.
The role of updаte in Bitcoin development
The Taproot updаte is a fundamentally positive and important development, according to Victor Pershikov, lead analyst at 8848 Invest. According to him, the activation of the updаte had almost no effect on the quotations of the first cryptocurrency, because this event was already built into the price of the asset. However, in the future Taproot will increase the demand for bitcoin, the analyst is sure.
In terms of competition in the crypto market, the Taproot updаte is too late, Pershikov argued. He explained that many blockchain projects already have much better scalability and transaction anonymity than bitcoin. Assets such as Cardano, Ethereum, Litecoin and XRP are more effective as a means of payment, the analyst added.
“The technical development of bitcoin should be much more active in order to maintain the project’s leadership not only from a fundamental point of view, but also from a technological point of view”, Pershikov said.
Upgrades and price hikes
Some analysts believe that Taproot’s upgrade may be a key factor in bitcoin’s growth, said Binance Eastern Europe director Gleb Kostarev. He said many are comparing the current situation to the end of 2017, when bitcoin set an all-time high of $20,000 after the SegWit updаte was activated.
“A number of analysts are also inclined to believe that bitcoin is expected to grow amid the updаte. In their opinion, the cryptocurrency now repeats the patterns of past years, which point to a rise in the value of the coin”, Kostarev added.
The expert also reminded about the record growth of inflation in the United States. According to Kostarev, investors are now looking for an asset that will protect them from rising inflation. The current situation strengthens the position of bitcoin as an alternative class of investment assets with positive returns, Kostarev said.
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