On Wednesday, October 18, Lightning Labs unveiled an exciting update with the release of Taproot Assets. This new feature will allow developers a seamless experience for issuing, managing, and exploring stablecoins and other assets atop the Bitcoin blockchain network.
About Taproot Assets on Lightning Network
The release of Taproot Assets v0.3 provides builders with the essential tools to transform Bitcoin into a multi-asset network while ensuring scalability and preserving the core principles of the Bitcoin system. This protocol shall operate by using the existing Bitcoin Liquidity on the Lightning Network.
It is a significant step from Lightning Labs toward making Bitcoin a global financial routing network. Thus, the Bitcoin network will see a number of global currencies issued as Taproot Assets with several foreign exchange transactions settled instantly over the Lightning Network.
In Taproot Assets v0.3, the addition of asset-burn APIs simplifies asset redemption processes for issuers. By securely burning assets from the supply, issuers can then confidently release the corresponding real-world assets on-chain.
Furthermore, the update allows users to conduct on-chain Taproot Assets transactions without requiring both parties to be simultaneously online, enhancing the flexibility and convenience of asset transfers.
Bitcoinizing Global Assets
The Lightning Network community has witnessed strong growth, especially in the emerging market ever since El Salvador made Bitcoin a legal tender in 2021. This is because Lightning Network offers instant settlements, low fees, and peer-to-peer Bitcoin transactions without any financial intermediaries.
At the same time, the demand for stablecoins is growing rapidly. The fact that stablecoin issuers hold more US Treasuries than major developed countries such as Germany and South Korea underlines the global significance of these assets and provides a perspective on the substantial scale of global user demand for them.
Developers have been exploring real-world assets such as gold, US Treasuries, corporate bonds with programmatic coupon payments, and more. Bitcoin, with its global liquidity, decentralization, and security, offers the ideal platform for scaling these experiments to a mass market level. The Lightning Network provides the exact experience by using Bitcoin’s unparalleled security and decentralization features.
Top market players like Binance and Coinbase have been making efforts to integrate Lightning Network at their end. This shall provide a further boost to Bitcoin adoption in the global community.
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
A little more than two months ago, Taproot went live. What does the biggest update to the Bitcoin network in years bring to the table? How can it help the increasingly popular Lightning Network? That’s exactly what the article we’re about to summarize is about. It starts by informing us that “Bitcoin even has a scripting language,” and that it’s called Script.
Related Reading | Number Of Bitcoin Lightning Network Nodes Jumps 23% In Three Months
But before we get into that, what is Taproot?
“Taproot is a combination of three Bitcoin Improvement Proposals (BIPs) that enhance this scripting infrastructure: BIP340 – Schnorr, BIP341- Taproot and BIP342 – Tapscript. The key of Taproot that unlocks all the others is the introduction of Schnorr Signatures, which allow for key and signature aggregation. 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. Nor are those kinds of contracts a priority for the Bitcoin network, as our sister site Bitcoinist points out. Also, to curb our expectations, let’s read what Tales From The Crypt podcast’s host Marty Bent warned us about in his newsletter:
“It is important to understand that these benefits aren’t going to be immediate. They are going to come to market slowly over time as the software gets implemented into wallets and other services. Many are expecting Taproot to get activated over the weekend and all its potential benefits to be realized 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.
How Does Taproot 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. Anyone monitoring one of these transactions would see nothing but 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.”
BTC price chart for 01/04/2021 on Gemini | Source: BTC/USD on TradingView.com
Private And Public Lightning Network Channels
What’s the problem? Well, the network doesn’t announce the creation of private channels. The public ones, on the other hand:
“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.”
Related Reading | How Big Is Bitcoin’s Lightning Network? The Answer Will Surprise You
Also, let’s take into account that surveillance firm Chainalysis already announced a Lightning Network-related 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”. Well, Taproot has an elegant solution for that:
“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. The info this article contains is just the beginning, the low-hanging fruit that we can see from our advantage point. Remember what Marty Bent said, “these benefits aren’t going to be immediate.” The Taproot-enabled stage of Bitcoin is just starting.
Featured Image by Cooper Baumgartner on Unsplash | Charts by TradingView
Heading into a new trading week, here is a quick roundup of the top five stories from the technology, corporate and cryptocurrency sectors that investors would not want to miss out on from the weekend.
1. Elon Musk’s Dig At Bernie Sanders: Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk has taken a dig at Sen. Bernie Sanders (I-VT) after the progressive legislator demanded that the ultra-wealthy must pay their “fair share” of taxes.
Musk — the world’s richest person — responded by saying he kept forgetting that Sanders was “still alive” and also asked whether the senator wanted Musk to sell more Tesla stock.
2. Apple ‘Privacy Glasses’ Patent: Apple Inc. (NASDAQ:AAPL) has filed a patent for a pair of glasses that would only allow an iPhone owner to view content on the phone’s display and will block others without the glasses from viewing the screen. The patent filed by Apple with the United States Patent and Trademark Office is described as “privacy glasses.”
3. Morgan Stanley Economists Differ With CEO On Fed Rate Hike: Morgan Stanley (NYSE:MS) economists have differed with the company’s CEO James Gorman by saying they do not expect the Federal Reserve to raise interest rates until 2023. Gorman had said last month that the Fed should “start moving” in the first quarter of 2022.
4. Bitcoin Rises After Taproot Upgrade: Bitcoin (CRYPTO: BTC) traded higher early Monday after a major upgrade to the apex cryptocurrency’s network, “Taproot,” was activated on Sunday. The upgrade is expected to improve the cryptocurrency’s privacy, transaction efficiency and security. Bitcoin was up 2.3% during the past 24 hours, trading at $65,799.86 at press time.
5. Dogecoin Co-Creator Gets Musk’s Support: Dogecoin (CRYPOTO: DOGE) co-creator Billy Markus’ comment on Twitter that the meme cryptocurrency’s low fees makes it superior to competing cryptocurrencies such as Bitcoin and Shiba Inu has received support from Tesla CEO Elon Musk.
Musk, who is a great supporter of Dogecoin and owns a dog named Floki of the Shiba Inu breed, supported the tweet and liked it.
What Else: Among other stories from the weekend, investors would want to check out the EV week in review, how Southwest Airlines Co. (LUV) plans to avoid flight cancellations during the busy holiday travel period, and how Apple ended an eight-year legal battle with its employees over its bag check policy.
Also, streaming giant Netflix Inc.’s (NASDAQ:NFLX) hit series “Squid Game” has surpassed the most popular television series of all-time, the HBO show “Game of Thrones,” in terms of popularity on YouTube, the video platform owned by Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL).
Bitcoin price is currently hovering around $65,524 with a bullish bias after successfully bounding off the $62,000 coincinding with the 50-period Simple Moving Average (SMA) support wall on November 13. The bullish momentum is set to continue as the developments around the Taproot soft fork upgrade come into focus.
Taproot Upgrade To Fuel BTC’s Uptrend
Bitcoin (BTC) turned away from the all-time high (ATH) around $69,034 in the past week due to profit-taking and capital rotation from the big cryptocurrencies into undervalued altcoins. In addition, BTC’s setback was also fueled by the Securities and Exchange Commission’s (SEC) rejection of VanEck’s Bitcoin exchange-traded product that aimed to track Bitcoin’s spot price.
This negative development was, however, quickly overshadowed by the successful activation of the Taproot soft fork on November 13. The Taproot soffork upgrade is expected to improve the Bitcoin blockchain network’s privacy, efficiency and smart contracts capability. Hampus Sjöberg, a Bitcoin developer who runs a website dedicated to the Taproot upgrade has termed this activation as the “greatest win” since it has proved that the Bitcoin network can do upgrades, which is important for the longevity and increased utility of the network.
This development is expected to push BTC upwards especially after it has added 1.52% so far on the day.
Bitcoin price faces little Resistance Upwards
BTC/USD price sits on strong support around $62,702 provided by the 50 SMA in coincidence with the lower boundary of the rising wedge. Bitcoin bulls appear determined as they recapture the recent range highs around $65,500. This appears to have bolstered bulls who aim to overcome the BTC ATH to tag the target of the rising wedge at $69,600, after which discovering new price highs at $70,000 and above will be the next logical move.
The upsloping moving averages and the upward movement of the Relative Strength Index (RSI) away from the midline validates BTC price bullish narrative.
BTC/USD Daily Chart
Moreover, on-chain metrics from In/Out of the Money around Price (IOMAP) model by IntoTheBlock indicate that BTC is sitting on robust support downwards. For example, the support above $63,000 is where roughly 780,650 BTCs were previously bought by around 1.11 million addresses.
Bitcoin IOMAP Chart
This support is robust enough to absorb any selling pressure threatening to pull the price of the bellwether crypto below this point. The same IOMAP chart shows that the path with the least resistance for BTC is upwards.
On the flipside, things could go awry for the Bitcoin price if sellers enter the scene and pull the price below the immediate support around $63,000.
A decisive bearish breakout below this level will confirm the breakdown of the wedge chart pattern pulling BTC towards the November 6 lows around $60,192. Beyond this level, the next major support wall is around the $57,700 level.
Disclaimer
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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The Bitcoin network has finally come with its new and highly anticipated protocol, Taproot. Going live on Sunday, this is Bitcoin’s first major upgrade since SegWit back in 2017.
Taproot Comes With Great New Features
According to reports, the Taproot upgrade has been a long time coming — about seven years precisely but was kick-started again on June 12, 2021. Since then however, the network put out a waiting period so that all nodes could upgrade to the newest version of Bitcoin Core during that time.
Without any doubt, Taproot is the most significant upgrade to the Bitcoin network since SegWit in 2017 as earlier mentioned. Going back to SegWit, it fixed several bugs and allowed more transactions to be embedded in each block while also serving as the foundation for Layer 2 payment channels like ‘Lightning’.
The New Features Revealed In Details
Meanwhile, even as today’s upgrade suggests mostly a backdoor kind of change, for now, Taproot protects privacy on the Bitcoin blockchain by concealing complicated transactions. It also makes them more lightweight and even cheaper.
Another benefit of this upgrade is that it has a way of combining both simple and complex transactions without necessarily maxing out the blockchain.
Now, one might ask how it’s able to do this. Well, simply by replacing the current signature protocol of Bitcoin with Schnorr signatures — which are relatively faster. All of this now helps to bolster the transaction privacy of Bitcoin, making it a lot easier to implement lightweight smart contracts.
The implication of this for Bitcoin is that, now, multiple-signatories transactions can be allowed at once, making such transactions easier to carry out, and even way cheaper. In the same manner, putting Bitcoin’s finite space to better use will also make the blockchain more scalable.
But then, there’s the thing with most things on Bitcoin. This upgrade will amount to nothing, except, of course, developers explore and build on Taproot, integrating new features that will boost privacy, scalability, security on the network.
Disclaimer
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
About Author
Bitcoin Taproot upgrade is all set to get activated by this Saturday nearly five months after getting locked in nearly five months ago in June. The taproot upgrade is being seen as one of the biggest upgrades on the BTC network in a decades time. The much-awaited upgrade promises to help with privacy, efficiency, and security.
Taproot promises to bring programmable scripting quite similar to Ethereum smart contracts and thus could make way for other ecosystems working on top of it. In today’s time even though Bitcoin is clearly the top crypto asset, its functions are not as vast as smart contract networks such as Ethereum, and Polkadot.
With a focus on privacy, the Taproot upgrade would introduce MAST (Merkelized Abstract Syntax Tree) which would make it easier to obscure the source of transactions and make the Bitcoin network more privacy-centered. The upgrade would make it difficult for an outsider to differentiate between multi-signature transactions and Lightning Network transactions.
Is Taproot Upgrade Priced In?
Any major upgrade for a crypto blockchain has obvious implications on its price, mostly in a bullish manner. It was seen during Ethereum’s London Hardfork as well as in the runup to Cardano’s smart contract upgrade. In both the mentioned cases the price of the native crypto-assets rose to new ATHs due to the anticipation around it. The same can be said for the Bitcoin network as well given Taproot is one of the biggest upgrades that would various aspects and functionalities.
BTC’s price is currently trading at $64,670 after recording a new ATH above $69,000 on several exchanges. The price retraced soon after reaching the ATH and dipped by nearly $5K, however with the taproot upgrade just days away, BTC could get out of the consolidation phase to retest ATH. Many market pundits also believe that the Taproot upgrade is already priced in for the top cryptocurrency.
Disclaimer
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
About Author
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