Taproot launched two months earlier. What is the greatest update of the Bitcoin network for years? What can this do to help the Lightning Network, which is becoming increasingly popular? That’s exactly what the article we’re about to summarizeIt is all about. It starts by informing us that “Bitcoin even has a scripting language,” and that it’s called Script.
Taproot, however, is something we should know before we go into it.
“Taproot is a combination of three Bitcoin Improvement Proposals (BIPs) that enhance this scripting infrastructure: BIP340 – Schnorr, BIP341- Taproot and BIP342 – Tapscript. Schnorr Signatures are the key to unlocking all other keys. They allow key and signature accumulation. This means that multiple parties are able combine their keys to a single public key, thereby allowing them to sign a single message.”
It’s important to know that Taproot won’t allow “fully expressive” or “Turing complete” contracts like in Ethereum and all its related chains. These types of contracts are not a priority to the Bitcoin network. Check out our sister website Bitcoinist. Also, to curb our expectations, let’s read what Tales From The Crypt podcast’s host Marty Bent warned us about Subscribe to his Newsletter:
“It is important to understand that these benefits aren’t going to be immediate. As the software is integrated into wallets, and other services, they will slowly come to market. Taproot is expected to activate quickly and offer all of its benefits immediately. This is simply not the case and it is important that this fact is understood.”
Ok, let’s get into the meat and potatoes.
Taproot How Can It Help The Lightning Network
First of all, every Lightning channel consists of “2 of 2 multisigs”. So, a first benefit of being “able combine their keys to a single public key” is that “we have lighter transactions and therefore cheaper channel openings”. Not only that but “signature aggregation also offers enhanced privacy since its contents are indistinguishable from a single-signature transaction.”
To clear up how does this benefit privacy, let’s quote the Binance Academy:
“Spending Bitcoin using Taproot could make a transaction in a Lightning Network channel, a peer-to-peer transaction, or a sophisticated smart contract become indistinguishable. Any person monitoring these transactions will see only a peer to-peer transaction. It’s worth noting, though, that this doesn’t change the fact that the wallets of the initial sender and final recipient will be exposed.”
However, this is not quite true… yet. The Voltage article clarifies, “Does this mean that lightning channels are now unidentifiable on the blockchain? Well, the answer is ‘yes’ for private channels and ‘not quite yet’ for public channels.”
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Public and private lightning network channels
What’s the problem? Well, the network doesn’t announce the creation of private channels. On the contrary, they do not announce public channels.
“Unfortunately, even if we do hide the channel openings on the blockchain, the current specification of the lightning protocol requires nodes to broadcast the details of the funding transactions when announcing their channels.
This might seem counterintuitive at first, but it’s also an elegant way to prevent nodes spamming the network with fake channels.”
Also, let’s take into account that Chainalysis, a surveillance company has already been announcedLightning Network service. We should assume there are “sybil nodes surveilling the network”. And that “With enough hostile nodes” a bad actor could paint “a fairly detailed picture of the flow of funds”. Taproot provides an elegant solution to this problem:
“Taproot’s introduction of Schnorr signatures paves the way for a type of smart contract called Point Time Locked Contracts (PTLCs). PTLCs operate in the same manner as HTLCs by allowing payments to be identified by nodes, but PTLCs come with a handy feature of being able to randomize its identifier with each hop thereby making it impossible for nodes to correlate the traffic of sending and receiving nodes.”
Understand that “Taproot is a door that opens many other doors”. It’s a new toolkit with which developers all over the world will create new features and improvements. We can only see the benefits from this advantage point, and the information in this article is only the beginning. Remember what Marty Bent said, “these benefits aren’t going to be immediate.” The Taproot-enabled stage of Bitcoin is just starting.
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