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Understanding Bitcoin: Native SegWit vs. Taproot

By NasdaqNico | BitGet Wallet Academy | 6 Dec 2023


  • Bitcoin has advanced significantly with milestones like BRC-20 tokens and Ordinals, alongside pioneering updates such as Native SegWit and Taproot, addressing scalability concerns.

  • Native SegWit emphasizes weight optimization, enhancing scalability by reducing block size, while Taproot focuses on signature aggregation, streamlining complex transactions with slight potential cost increases.

  • Native SegWit enables cost-effective transactions due to reduced data size, ideal for regular Bitcoin transactions, whereas Taproot caters to more intricate transactions, potentially leading to slightly higher costs but enhancing efficiency.

  • Bitget Wallet now supports BRC-20 tokens, facilitating trades, asset management and placing a continued focus on growing the overall Bitcoin ecosystem.

 

The Bitcoin network has seen tremendous growth in recent times, such as with the introduction of the BRC-20 token standard and the Ordinals protocol - adding yet another prominent milestone to its history of groundbreaking updates, including Native Segregated Witness (SegWit) and Taproot. But what exactly are SegWit and Taproot? Let's take a look at how these upgrades have addressed the network's scalability issues and the differences between the two.

 

Native Segregated Witness: Streamlining Transaction Data

Native SegWit emerged as an evolution of the SegWit upgrade, designed to alleviate Bitcoin's scalability challenges. Its primary goal was to reduce network congestion caused by the limitations of Bitcoin's block size.

Introduced as a hard fork in 2017, SegWit efficiently reduced the size of transaction data by segregating the signature data, enhancing transaction capacity by accommodating more transactions within a block. Notably, SegWit addresses initiate with "3" and significantly improved transaction speeds and scalability while reducing transaction fees.

However, Native SegWit surpassed SegWit's efficiency by focusing on weight efficiency. This upgrade considerably decreased the size and weight of a Bitcoin block, further enhancing transaction speeds and scalability. Distinctively, Native SegWit addresses begin with "bc1," offering enhanced readability and improved error detection due to lowercase addresses.

 

Taproot: Advancing Privacy and Efficiency

In 2021, Bitcoin underwent another significant upgrade known as Taproot, aiming to streamline transaction verification and bolster efficiency. Unlike Native SegWit, Taproot brings forth an array of advanced features focused on improving privacy, efficiency, and scripting capabilities.

Additionally, while the 2017 SegWit upgrade was introduced as a hard fork (with the simultaneous creation of Bitcoin Cash), Bitcoin core developers took a deliberately prolonged and cautious approach to the implementation of Taproot. It was first proposed in January 2018 by Bitcoin developer Gregory Maxwell and later developed into a Bitcoin Improvement Proposal (BIP) draft by Pieter Wuille in May 2019. In June 2021, 90% of Bitcoin miners signaled support for the Taproot upgrade, and the soft fork for Taproo to officially make it to the Bitcoin blockchain finally took place on November 14, 2021, at block 709,632.

Structurally, the Taproot upgrade is a combination of three different BIPs: BIP340, BIP341, and BIP342.

BIP340 introduces Schnorr signatures, replacing the Elliptic Curve Digital Signature Algorithm (ECDSA). Unlike ECDSA, Schnorr signatures enable validation of multiple transaction signatures simultaneously, streamlining the process and enhancing privacy for multi-signature wallets. This upgrade reduces transaction size, amplifying network capacity and expediting the processing of bulk transactions.

BIP341, known as Taproot, implements Merkelized Abstract Syntax Trees (MASTs) to optimize transaction data storage on the blockchain. MASTs store only the executed transaction outcome instead of the entire tree, promoting scalability by reducing blockchain storage requirements.

BIP342, or Tapscript, adapts Bitcoin's Script coding language to accommodate Schnorr signatures and Taproot implementations. It 56889c8a83fd0bc872f09dcbe6ce6d5e96b25dfedacf639b6adb0317d12a49e3.png

The integration of Schnorr signatures, Taproot's signing algorithm, allows for aggregated signatures, reducing transaction data size and enabling simpler high-level protocols such as atomic swaps and payment pools.

 

Distinguishing Factors and Unique Advantages

The distinction between Native SegWit and Taproot lies in their core functionalities and the enhancements they bring to the Bitcoin network:

 

1. Efficiency

Native SegWit: Native SegWit sets its sights on refining Bitcoin's efficiency by primarily focusing on weight optimization. By minimizing the block size and restructuring how data is stored in transactions, Native SegWit substantially enhances the network's scalability and transaction processing speeds. This optimization leads to a smoother and more agile transaction experience, enabling a higher throughput of transactions within Bitcoin's blocks.

Taproot: In contrast, Taproot brings forth a paradigm shift in efficiency through its innovative approach of signature aggregation and spending condition optimization. This upgrade aims at streamlining transactions by amalgamating multiple signatures into a single signature, reducing transaction data size. While this may result in slightly higher costs for certain transactions due to increased data, Taproot shines in facilitating more intricate transactions, such as smart contracts, with unparalleled efficiency.

 

2. Cost

Native SegWit: Native SegWit transactions are celebrated for their cost-effectiveness, primarily owing to their reduced data size. This reduction translates into lower fees, providing a cost-efficient solution for regular Bitcoin transactions. The optimized transaction data allows users to conduct their everyday transactions at a reduced expense compared to traditional transaction methods.

Taproot: Taproot's approach to transaction costs varies as it leans towards accommodating larger data sizes. While this may marginally elevate the costs of certain transactions, Taproot's niche forte lies in its ability to deliver heightened efficiency, particularly for more complex transactions. Its optimizations cater to multifaceted transactions, enabling greater functionality and flexibility, albeit with a slight cost adjustment.

 

3. Privacy

Native SegWit: Privacy isn’t the central focus of Native SegWit. While it enhances transaction efficiency, it doesn't introduce additional privacy features. Transactions made using Native SegWit addresses are more about optimizing space and processing, rather than anonymizing or concealing transaction details.

Taproot: Taproot stands out significantly in the realm of user privacy. By integrating sophisticated cryptographic techniques, Taproot masks transaction types and details, making them indistinguishable from one another. This advancement in privacy ensures that transaction patterns and specific details remain obscured, enhancing the anonymity and privacy of users engaging in various transactions.

 

 

4. Smart Contract Functionality

Native SegWit: Native SegWit doesn’t encompass smart contract capabilities within its scope of enhancements. Its primary goal revolves around enhancing transaction efficiency and scalability without delving into complex programmable contract functionalities.

Taproot: Taproot is revolutionary in the realm of smart contracts. With reduced resource requirements, Taproot paves the way for intricate smart contracts on the Bitcoin network. Its introduction of complex contract execution with more streamlined resource usage marks a significant leap towards expanding Bitcoin's capabilities beyond mere transactions.

 

 



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