Taproot

Taproot is a Bitcoin protocol upgrade that enhances privacy, efficiency, and smart contract capabilities by introducing a new transaction type and signature scheme.

What is Taproot?

Taproot is a significant soft fork upgrade to the Bitcoin network, activated in November 2021 at block height 709,632, aimed at improving transaction privacy, scalability, and flexibility.

It introduces a new output type called Pay-to-Taproot (P2TR), which combines the benefits of traditional public key-based transactions and complex scripts (like multisignature or timelocks) into a single, indistinguishable format. By leveraging Schnorr signatures and a Merkle Abstract Syntax Tree (MAST), Taproot makes complex transactions appear identical to regular ones on the blockchain, enhancing privacy. As of 2025, approximately 15-20% of Bitcoin transactions use Taproot, with adoption growing among wallets and exchanges like Coinbase.

Schnorr signatures, a key component, replace the older ECDSA signatures, allowing signature aggregation to reduce data size for multisignature transactions (e.g., cutting a 3-of-5 multisig transaction’s size by ~20%). This efficiency lowers fees (Taproot transactions average ~0.00015 BTC in fees vs. ~0.0002 BTC for non-Taproot in 2025) and supports scalability solutions like the Lightning Network. MAST further optimizes smart contracts by only revealing executed script conditions, reducing blockchain bloat.