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Definition: Taproot

The first major upgrade to Bitcoin since SegWit in 2017. Launched November 16, 2021, Taproot is a Bitcoin soft fork that improves privacy and efficiency. It also improves privacy for Layer 2 Bitcoin chains (see Lightning Network). Taproot enhances Bitcoin scripting, which takes it one step closer to providing smart contracts in the future, a major feature of the Ethereum blockchain (see Ethereum).

(BIP-340) Schnorr Signatures
Taproot uses the Schnorr algorithm, which combines multiple signatures into one, thus hiding their identities and creating a more private transaction. Multiple unspent transaction outputs (UTXOs), which are records of the available and spendable Bitcoins for each coin owner, are merged into a single, smaller transaction. See Bitcoin transaction.

(BIP-341) Pay-to-Taproot
New Pay-to-Taproot (P2TR) spending rules are more private because complex multi-signature transactions appear the same as simple transactions with one signature. Merkelized Alternative Script Trees (MAST) enables locking UTXO outputs to multiple scripts that are compressed via hashes in a tree hierarchy (Merkle tree).

(BIP-342) Tapscript
Tapscript provides new op codes for Bitcoin transaction scripts that implement P2TR. Tapscript scripts verify Taproot spending and Schnorr signatures. See Bitcoin.