ELI5: Taproot Activation

The aim of this post is to provide a brief summary, of the implications that come with the adoption of Bitcoin’s recent Taproot softfork. Its aim is to optimize Bitcoin’s
scalability, privacy, and smart contract functionality.

I got to learn about the nitty gritty details that are involved with the Bitcoin protocol whilst working for Bitonic, a BTCEUR exchange with proper moral values. Do note,
I can’t stress enough the importance of the DYOR (Do Your Own Research) idiom.

The softfork introduces a new address type (P2TR), that aims to:

• Reduce the size of complex transactions.
  • This improves Bitcoin’s scalability.
• Complex transactions will be (in most cases) indistinguishable from simple ones.
  • This improves Bitcoin’s transactional privacy.
• Support for more complex transactions.
  • Better smart contract functionality.

Spending conditions of these ‘complex transactions’ could be:

• Transactions that originate from multisignature addresses (aka wallets that are owned by multiple parties).
  • “Only transact if child AND /both/ parents agree.”
• Transactions with, one or more timelocked spending condition(s).
  • “Only transact if child reaches the age of 21.”
• Transactions that combine the features stated above, accompanied by (optional) fallback condition(s).
  • “Only transact if child reaches the age of 18 AND /both/ parents agree, OR if child reaches the age of 21.”