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Taproot upgrades can now be counted in Bitcoin

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The Blockchain network is looking forward to building their own latest Taproot upgrade for Bitcoin which would help in increased acceptance and investment. 

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The last time the Bitcoin network was locked in a major upgrade was in July 2017, the price of the Bitcoin cryptocurrency was up nearly 50% until August 23, when the changes took effect.

Now that the original blockchain network is gearing up for its next big upgrade in November, known as Taproot, some investors are expecting a price reaction to be close to this magnitude. The price of BTC has doubled this year, hitting a new all-time record below $67,000 last week. While additional advantages are possible, Taproot alone is unlikely to be the catalyst.

“The Taproot upgrade will have minimal impact on the Bitcoin price,” said Edward Moya, senior market analyst for online stockbroker Oanda. The Taproot upgrade will go into effect on November 16 and improve data protection for certain online transactions through an innovation called "Schnorr Signatures". The update will also allow for lighter "smart contracts" - basically programs stored on the blockchain that are executed when certain conditions are met. Smart contracts are a key feature of Ethereum's competitive network and are driving the rapid growth of decentralized finance (DeFi) applications that aim to automate many functions of banks and retailers.

“This is a revolutionary moment for Bitcoin,” said Don Guo, CEO of Broctagon Fintech Group. However, this episode highlights key differences in Bitcoin's approach to network upgrades versus competing blockchains, where upgrades and adjustments are much more common. Ethereum, the number 2 blockchain, right after the London hard fork in August and now with the Ethereum 2.0 overhaul next year, sees the price of Ether, its domestic cryptocurrency, five times this year. 

Is Taproot Good for Bitcoin?

Bitcoin proponents say the slow approach just shows how well-organised and careful the developers are - cautious about doing anything that could endanger the revolutionary blockchain network that didn't live up to most of the expectations 12 years ago.

However, some investors are becoming more doubtful and are questioning about the adaptability and expansion of the Bitcoin network, worried that its profits could be undermined in the first step. Given the rapid development in the blockchain industry, four years can feel like thousands of years without a major improvement.

“Some might argue that Bitcoin's lack of improvement shows its technical advantage over Ethereum,” said Denis Vinokurov, research director at Synergia Capital. 

He said that the launch of Taproot will likely have a limited impact on cryptocurrency prices as improvements have been expected for years. "The risk is that the market will see it as something that is already being offered elsewhere," Vinokurov said.

Adam Beck, CEO and protocol researcher at Blockstream, said in an interview that although updates are rare, the developer horde is constantly working to improve the network behind the scenes. The developers are preparing to upgrade Taproot in 2018, the year after the Segregated Witness or "SegWit" upgrade expired.

“It is a false story that people claim that Bitcoin is not growing very fast,” Beck said. “People mistake strict quality assurance for a lack of change. There is a flow of change and it's big, but the release schedule is slow because it needs to be tested." "People get impatient because it's been a year since they heard about it in the press," Beck said. "Competing coins are doing very futuristic marketing of what could happen in five years," he said.

Four years ago ...

If the story is any guide, upgrades can lead to big wins. The 2017 update that introduced SegWit improved Bitcoin's ease of use by "separating" certain data from individual transactions and effectively making them smaller. This step allows more transactions to be processed without increasing the size of each data block.

Another key feature of the 2017 upgrade is the activation of the Lightning Network, a secondary layer that builds on top of the Bitcoin base layer and enables near-instant, free, and more private Bitcoin transactions. The development of the Lightning Network in 2017 made it a key part of El Salvador's efforts to make Bitcoin legal tender along with the US dollar. SegWit was approved on July 23. A month later, when the upgrade started, Bitcoin price jumped 50% on August 23, 2017, to a staggering $4,247.

But with Bitcoin now trading at over $60,000, some investors believe an increase in cryptocurrency prices may be – well, looking tired. “There may be a limit to how much more you can get out of Bitcoin,” said Daniel Cowry, chief operating officer of Cypherpunk Holdings Inc., a digital asset investment firm. (Corey is a former CoinDesk reporter.)

"If you're an institutional investor, you seem to have fallen behind," Cowrie said. Therefore, according to Cawrey, investors are looking for Ethereum and a number of competing blockchains known as ethnic killers.

What will Taproot enable?

Anton Chashin, CEO of Bitfrost.io, a blockchain middleware platform, said the introduction of smart contracts could actually increase the interest of institutional investors as new privacy enhancements, on the other hand, tightened oversight by governments concerned with preventing tax evasion could make money. money laundering and all illegal activities.

"Although they can appeal to private deals, they can also raise suspicion from regulators," Chashin said. "There's been a lot of talk about regulation and this could be the regulator's last step down to be more aggressive. Cryptocurrency investors were concerned about China's crackdown on bitcoin miners in September. Concerns about grid energy use and the potential for environmental damage remain of great importance to many traditional investors.

It can be difficult for investors to be much more optimistic about Bitcoin than it already is, as the price has completely recovered all lost positions around $28,600 in June. The long-awaited launch of new Exchange Traded Funds (ETFs) in the US, focused on the future of Bitcoin, kicked off last week, with ProShares Bitcoin Strategy's ETF net worth exceeding $1 billion in just two days. The Bitcoin Valkyrie Strategy ETF starts on Friday. The VanEck ETF will hit the market on Tuesday.

However, according to blockchain analytics firm IntoTheBlock, updating Taproot could show that Bitcoin is a technology that can be adapted and updated without affecting its reliability or uptime, while maintaining its investment thesis as a means of storing value. "We expect investors to be positive about this improvement and that prices will continue to rise in the longer term," said Juan Pelizer, research analyst at IntoTheBlock.

Guo from Broctagon said: "If the technical implementation is successful, followed by increased acceptance, there is no reason not to follow the price." Potential for new product and application development.

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