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Bitcoin Taproot: 5 Benefits That Will Boost BTC in 2022

Bitcoin’s Taproot upgrade launched on November 14 after years in the making. It’s a more efficient network offering greater privacy on transactions, smart contract functionality, with the potential of introducing DeFi and NFTs on the Bitcoin network. 


Bitcoin’s last network upgrade was in 2017. The upgrade, SegWit (Segregated Witness), reduced the data needed for blocks to record per transaction. While SegWit was a giant leap forward, Bitcoin still lacked many next-generation blockchain features found in layer-1 altcoins Cardano, Ethereum, Polkadot, Polygon, and Solana, for example, DeFi protocols and NFT ownership.

With the introduction of smart contract capability, the Bitcoin network now has the potential to support decentralized finance (DeFi) and Non-Fungible Tokens (NFTs) – two of the hottest topics in the crypto space.

What is Bitcoin Taproot?

On November 14 2021, at the block height of 709,632, the Bitcoin Core protocol’s Taproot upgrade finally launched, and maximalists now believe Bitcoin can eventually compete with newer altcoins in terms of use cases. 

Taproot is a long-awaited upgrade to Bitcoin which adds Schnorr signatures, Pay-to-Taproot (P2TR) outputs, and new scripting capabilities to its code. The Taproot update batches multiple signatures and transactions together, thus helping with privacy as well. This makes it simpler and quicker to verify transactions on Bitcoin’s network and more challenging to identify transaction inputs on Bitcoin’s blockchain.

Taproot was first introduced in 2018 by Greg Maxwell, and received the go-ahead from the notoriously change-resistant Bitcoin community after three Bitcoin Improvement Protocols (BIP) were launched in November 2020. In June 2021 9 out of 10 miners approved the upgrade contained in Bitcoin Core version 21.1, and the stage was set for its end-of-year implementation. 

5 Taproot Benefits To Help Bitcoin’s privacy and scale

After years of waiting for Taproot, it is understandable why Bitcoin enthusiasts are hyped about the upgrade. But why? Well here are a few good reasons:

1. Enhanced privacy

The Taproot upgrade Bitcoin introduces Schnorr Signatures to the network, replacing Elliptic Curve Digital Signature Algorithm (ECDSA) encryption (which derives a transaction signature from the Bitcoin wallet private key), thereby promising greater privacy. The new signatures will display multi-signature transactions as single transactions. 

The current system uses the Elliptic Curve Digital Signature Algorithm (ECDSA), a method that produces a digital signature derived from the private key of the Bitcoin wallet in the transaction.

2. Network Efficiency

By compressing data, Schnorr signatures will help eliminate unnecessary data stored on the Bitcoin network. The Bitcoin network is expected to become more efficient and achieve greater scalability with more space on the network.

3. Smart Contracts

The most exciting feature in Taproot is the introduction of smart contracts to the Bitcoin network. Smart contracts are the basis of all the fantastic features of new layer-1 and layer-2 blockchains, and as we can see with the blossoming of the Ethereum ecosystem (and new ones like Polkadot and its parachains), it is a vital area that continues to drive growth and innovation in crypto.

4. Cheaper Transactions

Because Schnorr signatures require less data for processing multi-signature transactions, transaction fees will cost less.

5. Convenient compatability

The Taproot upgrade is dependent on miners and wallets to update to this software version of Bitcoin in order to take effect.

However, the Schnorr signature (which we explain below) is compatible with the previously used ECDSA mechanism, which means that Bitcoin parties can carry on with their existing Bitcoin Core versions without sacrificing functionality, choosing when to update to Taproot when most convenient to them.

How do Schnorr Signatures work?

The Schnorr upgrade essentially creates one private key for batched transactions, thereby reducing the transaction load and improving the network’s speed and effectiveness. , Schnorr also lightens the transaction load on the blockchain, thereby increasing the blockchain’s speed and efficiency into the bargain. Taproot further makes Lightning transactions more private by not requiring a unique key each time. This means also third parties cannot see which transactions use multi-signature technology.


Unlike the SegWit upgrade, Taproot has received universal support from the Bitcoin community. Although the launch of Taproot did not have any initial impact on the price of Bitcoin, which continues to drop after an amazing year of new record highs, it’s easy to see why there is a lot of optimism about the upgrade. 

Taproot exposes Bitcoin’s network to smart contracts, opening the potential for the development of DeFi and NFTs and more. This new utility of the Bitcoin network could lead to dramatic advances in the coming years. 

Journeying down memory lane will reveal that the price of Bitcoin had climbed more than 50% a month after the SegWit upgrade went live on July 23. And of course, one only has to see the effect that every four years’ Bitcoin Halving has on the price of BTC the year after. 

With Bitcoin now trading around $47k after a massive dump on Friday following Omicron fears, year-end profit-taking, and a stock market slump, innovations like Taproot are sure to help recalibrate Bitcoin and future-proof it, protecting its market lead against a whole new generation of ambitious altcoins that have made remarkable progress in 2021. 

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