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Bitcoin is set to undergo a rare upgrade to its underlying technology, after a consensus of miners across cryptocurrency networks approved the process over the weekend.
As the largest cryptocurrency by market value, bitcoin operates on its own Bitcoin protocol, which is the underlying blockchain network used to mine tokens and manage transactions. However, while its younger, cheaper, and more nimble counterparts have made several software upgrades in their day, Bitcoin’s history is fraught with warnings about what can go wrong if an upgrade isn’t. checked correctly.
Known as Taproot, the upgrade is expected to arrive in November as it will take time to make sure the changes are bug-proof and everything runs smoothly, which is vital for Bitcoin to do its best. evidence as a viable financial system. It’s also a smooth upgrade, which means it doesn’t need to change the way Bitcoin works for everyone. Older wallets can still work for buying and selling crypto, leaving others to choose if they want to take advantage of the new features that Taproot will bring.
The main thing Taproot will do is make Bitcoin more efficient and private. For example, Bitcoin will soon be able to handle smart contracts, an agreement whose terms are written directly in code on the network, enabling new standards for application development. It will also make more complicated transactions less visible, so that larger organizations can perform larger transactions for custody purposes without attracting the attention of hackers.
These key aspects of the upgrade will position Bitcoin to consolidate its position at the top of the cryptocurrency market. New features like smart contracts could get more companies to enter the token network, grab the attention of competitors, and bring real use to Bitcoin.
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At present, Ethereum (and its corresponding token ether) is an institutional favorite for precisely this reason. The way its blockchain network is structured has allowed financial companies and investors to create detailed smart contracts on the protocol for years, which is one of the reasons it has been so popular as a network of choice for digital collectibles such as non-fungible tokens.
Ethereum’s varied use cases have also helped the price of ethers skyrocket much further than bitcoin’s own growth this year, increasing over 250% year-to-date from 40% of bitcoin. (after recent flash crashes).
These platforms are the basis of Web 3.0, Carol Alexander, professor of finance at the University of Sussex, told Fintech Files last month. Everything will become smart contracts, and the Ethereum chain has of course got the most smart contracts due to the craze for decentralized finance and NFTs.
But beyond that, you have smart contracts for global supply chains, you have smart contracts for insurance, you have smart contracts for banking and cash flow. All of these are now encoded on blockchain, as it is the most efficient way to time stamp and [certifying] authenticity that cannot be changed.
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Taproot is also unique in bringing together a historically divided community. The way Taproot got approval was for 90% of all blocks mined on Bitcoin to signal upgrade support for a two-week period, showing how miners are supporting new network changes.
If such a broad consensus could be reached on a soft upgrade like Taproot, it shows that it may be possible for miners to come together someday in the future to tackle other issues for Bitcoin, such as its carbon footprint.
Tesla chief executive Elon Musk said the automaker will resume accepting cryptocurrency payments once miners can prove that at least 50% of their business is done using sources from renewable energy. Taproot sets the stage for miners working together for positive change. If a billionaire swings a carrot big enough, maybe the same could happen again.
To contact the author of this story with comments or news, email Emily Nicolle
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