The enhancement, called Taproot, is the most significant change to the bitcoin protocol since the SegWit block capacity change in 2017.
The run-up to Taproot’s activation has spurred, in part, a rally in bitcoin, pushing it to an all-time high of $69,000 on November 10.
However, at its core, the upgrade introduces a new digital signature scheme called “Schnorr” that will help bitcoin transactions become more efficient and more private.
“But, while bitcoin likely won’t ever be as flexible as Ethereum from a smart-contract standpoint, with Taproot that gap will now narrow.
The Schnorr signatures can make more complex transactions on the bitcoin protocol, such as those from wallets that require multiple signatures, look like just any other transaction.
Bitwise’s Dowling said these large scale upgrades have paved the way for the next phase of innovation in the bitcoin network.
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