Bitcoin is gaining more privacy features as concern grows over the cryptocurrency's use in many ransomware attacks.
The most significant update in four years to the computer software that powers the world’s largest digital token was approved last weekend with little fanfare. In recent years, battles between groups known as miners who manage the network have been described as a civil war and have led to offshoots such as Bitcoin Cash.
While the main advancement makes the network easier to use for certain embedded applications called smart contracts, the so-called Taproot update could allow more people to use privacy wallets and services by making it even harder to figure out who is paying. That could bolster the anonymity features valued by supporters of the currency, which law enforcement says is often used for illegal purposes. The U.S. has recently linked cyberattacks on Colonial Pipeline Co. and JBS SA to Russian-based ransomware groups that used the cryptocurrency.
Bitcoin proponents said the changes could improve how payments are sent to hundreds of people and how crypto derivatives, or bets, are made on the network.
Today, the vast majority of smart-contract applications are built elsewhere, on networks like Ethereum. Taproot won’t make the Bitcoin network a direct competitor, as Ethereum has more developer activity and capabilities and is easier to use. But it’s a step in that direction and could make Bitcoin more attractive to more users and developers.
The exact new applications that Taproot will enable will take some time to determine. The Taproot update was approved last weekend by a majority of miners, whose computers verify transactions and are rewarded with Bitcoin. It will be implemented in November.
“Obviously we support anything that will increase demand for new uses of Bitcoin and the Bitcoin network,” said Fred Thiel, CEO of Marathon Digital Holdings, a Bitcoin miner that supports the upgrade.
Taproot will be a “soft fork,” meaning that the upgrade will be backward compatible with previous versions of the software. A key feature will be what’s known as centralized multi-public key signature, which effectively hides some of the complexities of a transaction published on the Bitcoin network. Not only does it ensure greater transaction privacy, it also allows for cheaper transactions by reducing the amount of data that needs to be recorded on the blockchain.
Information source: bloomberg.com
