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Bitcoin Taproot for Anonymous Smart Contracts

Bitcoin Taproot for Anonymous Smart Contracts

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Bitcoin developer Greg Maxwell has finished coding Taproot, a scheme that will make smart contracts hidden on the blockchain. However, Schnorr signatures need to be added to Bitcoin for Taproot to work, as well as Merkalized Abstract Syntax Trees (MAST). Taproot is named after the way Bitcoin smart contracts represent the root of a plant, with a thick central path and small alternatives that branch off.

As it is now, smart contracts can be created with Bitcoin using multiple signature (multi-sig) transactions. These sort of transactions require private keys from multiple people or they won’t be sent. This is quite rudimentary though, which is why MAST was developed. MAST allows conditions to be set on the signatures required, just in case one of the private key holders disappears or refuses to sign. With MAST users can set a time limit until only one signature is required, and any variation of this sort of thing, so Bitcoins that require multi-sig don’t get lost.

When multi-sig transactions associated with smart contracts are broadcast to the blockchain they are quite obvious in the block explorer, since they are different than all other transactions. Taproot increases anonymity by making multi-sig transactions look like a normal transaction. When Taproot is implemented, Lightning Network transactions won’t look different on the Bitcoin blockchain, since Lightning Network uses multi-sig smart contracts.

However, with the current Bitcoin signature scheme, Taproot won’t function properly. Bitcoin needs to be updated to Schnorr, a signature algorithm that is supposedly much better than the current algorithm. Schnorr allows signature data to be mashed together, which is essential for Taproot since it merges multiple keys into a single key.

For Bitcoin to be updated to add Schnorr and MAST, it would require the consensus of developers. If consensus is achieved, they would upload a new version of Bitcoin to their repository. Then, the Bitcoin world can choose to adopt the new version or not. Bitcoin updates often lead to controversy, as was seen with the vicious SegWit battle that caused Bitcoin Cash to form. It remains to be seen how the community will collectively respond to the Bitcoin updates needed to make Taproot a reality.


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