Why the rate of the first cryptocurrency practically did not react to the largest network update in four years and what to expect from the coin in the near future
On the morning of November 14, the Bitcoin network at block 709 632 activated the largest Taproot update in four years, which was proposed by Bitcoin Core developer and co-founder of Blockstream Gregory Maxwell in 2018. The update aims to improve the scalability, privacy, and efficiency of the Bitcoin network. As of 13:30 Moscow time on November 15, almost 54% of nodes supported Taproot and got access to the update's innovations.
What is Taproot
Prior to the release of Taproot, the largest update on the Bitcoin network was considered to be the Segregated Witness (SegWit) soft fork, which was activated at the end of August 2017. Thanks to SegWit, the network of the first cryptocurrency has reduced transaction fees and increased the block size.
The Taproot update also aims to reduce fees on the Bitcoin network through the introduction of multisig technology and the implementation of the Schnorr scheme. Prior to the latest update, the first cryptocurrency used digital signatures based on the ECDSA cryptographic scheme. Once Taproot is released, transactions will be able to receive multiple signatures and form a single signature from them. The fees for multisigned transactions are expected to be lower as they require less data to confirm them.
With the Taproot update, the first cryptocurrency network has the ability to create complex smart contracts through the integration of the MAST concept. The technology allows generating separate hashes for each spend condition. Smart contracts are represented on the blockchain as regular transactions.
The role of the update in the development of bitcoin
The Taproot update is a fundamentally positive and important event, says Viktor Pershikov, lead analyst at 8848 Invest. According to him, the activation of the update practically did not affect the quotes of the first cryptocurrency, since this event was already included in the price of the asset. However, in the future, Taproot will increase the demand for bitcoin, the analyst is sure.
From the point of view of competition in the crypto market, the Taproot update is too late, Pershikov claims. He explained that many blockchain projects already have much better scalability and transaction anonymity than Bitcoin. Assets such as Cardano, Ethereum, Litecoin and XRP are more efficient as a means of payment, the analyst added.
"The technical development of bitcoin should be much more active in order to maintain the leadership of the project not only from a fundamental, but also from a technological point of view," said Pershikov.
Modernization and rise in price
Some analysts believe that the Taproot update could be a key factor for Bitcoin's growth, said Gleb Kostarev, director of Binance in Eastern Europe. According to him, many compare the end of 2017 with the current situation, when, after activating the SegWit update, bitcoin set a historical maximum at $ 20 thousand.
“A number of analysts are also inclined to believe that against the background of the update, bitcoin is expected to grow. In their opinion, the cryptocurrency is now repeating the patterns of past years, which indicate a rise in the price of the coin, "added Kostarev.
The expert also recalled the record growth in inflation in the United States. According to Kostarev, investors are now looking for an asset that will protect them from rising inflation. The current state of affairs strengthens the position of bitcoin as an alternative class of investment assets with positive returns, Kostarev is sure.