The Taproot project was one of the first uses for Ethereum and generated significant hype, but as time has gone on it seems to be losing momentum. There are still many questions about how this technology will impact cryptocurrency that remain unanswered.
The “taproot bitcoin” is a system that has been designed to fix the issue of Bitcoin mining centralization. The system was released in 2017, but so far it has failed to live up to expectation.
On November 14, the Bitcoin Taproot update went live to considerable excitement. However, the price of Bitcoin has declined 11% since then, prompting accusations that it has failed to meet expectations.
Wider macro issues were at play, in effect, offsetting any tailwinds that may have occurred from Taproot being online, according to John Todaro, Vice President at financial services company Needham & Co.
Due to the enthusiasm of the previous several weeks, Todaro predicted a downturn, or breather, in the market cycle. He also mentioned the uncertainty that the signing of the Infrastructure Bill has caused.
But, perhaps more intriguingly, Todaro questioned if Taproot could achieve its goal of broadening Bitcoin’s use case beyond that of a store of wealth.
What is Bitcoin Taproot, and how does it work?
Since the introduction of SegWit in 2017, Bitcoin Taproot is the first substantial improvement. It was a watershed event for miners, who voted overwhelmingly in favor of its adoption.
In a word, Taproot improves the chain’s transaction efficiency and privacy. But, as an added benefit, it sets the groundwork for smart contracts, allowing for programmability.
The Taproot improvement, according to Alyse Killeen, Founder of investment company Stillmark, is significant because it would allow developers to increase Bitcoin’s usefulness beyond that of a store of wealth.
“Taproot is significant because it expands the range of options available to businesses interested in boosting bitcoin’s usefulness.”
Smart contract capabilities and decentralized applications (dApps) have the potential to significantly increase Bitcoin by bridging the gap between it and newer, more technically advanced chains.
Taproot wants to rewrite the story of the store of value.
Todaro told CNBC that Taproot is “a little bit” altering Bitcoin’s store of value story. While Ethereum is by far the most popular smart contract platform, Todaro wondered whether Bitcoin could now compete with it after the update.
“Can Bitcoin become more of a smart contract platform as a result of these recent implementations?” Can it begin to compete with other DeFi apps on a protocol level?”
Todaro, when asked for his perspective, expressed his skepticism, adding that things are in “wait and see mode.”
His explanation is based on a scarcity of developers who are currently developing apps. Todaro, on the other hand, points out that Taproot merely launched this week, hinting that Taproot isn’t a flop, at least not yet.
“Other projects that are based on the Bitcoin network and communicate with these new implementations are still needed.” So, although it’s still early on, it’s beginning to create that story in a way that looks a little different.”
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The “taproot fork” is a term that has been used to describe the change in Bitcoin’s consensus rules. The term was coined by Gregory Maxwell, and it refers to the idea of changing how mining works on the network. It was originally thought that this would make mining more decentralized, but it has not yet happened.
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