Taproot And The Lightning Network, A Match Made In Heaven

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Slightly greater than two months in the past, Taproot went dwell. What does the largest replace to the Bitcoin community in years convey to the desk? How can it assist the more and more well-liked Lightning Network? That’s precisely what the article we’re about to summarize is about. It begins by informing us that “Bitcoin even has a scripting language,” and that it’s referred to as Script.

Related Reading | Number Of Bitcoin Lightning Network Nodes Jumps 23% In Three Months

But earlier than we get into that, what’s Taproot?

“Taproot is a combination of three Bitcoin Improvement Proposals (BIPs) that enhance this scripting infrastructure: BIP340 – Schnorr, BIP341- Taproot and BIP342 – Tapscript. The key of Taproot that unlocks all the others is the introduction of Schnorr Signatures, which allow for key and signature aggregation. This means that multiple parties are able combine their keys to a single public key, thereby allowing them to sign a single message.”

It’s vital to know that Taproot received’t permit “fully expressive” or “Turing complete” contracts like in Ethereum and all its associated chains. Nor are these sorts of contracts a precedence for the Bitcoin community, as our sister web site Bitcoinist factors out. Also, to curb our expectations, let’s learn what Tales From The Crypt podcast’s host Marty Bent warned us about in his e-newsletter:

“It is important to understand that these benefits aren’t going to be immediate. They are going to come to market slowly over time as the software gets implemented into wallets and other services. Many are expecting Taproot to get activated over the weekend and all its potential benefits to be realized immediately. This is simply not the case and it is important that this fact is understood.”

Ok, let’s get into the meat and potatoes.

How Does Taproot Help The Lightning Network?

First of all, each Lightning channel consists of “2 of 2 multisigs”. So, a primary advantage of being “able combine their keys to a single public key” is that “we have lighter transactions and therefore cheaper channel openings”. Not solely that however “signature aggregation also offers enhanced privacy since its contents are indistinguishable from a single-signature transaction.”

To clear up how does this profit privateness, let’s quote the Binance Academy:

“Spending Bitcoin using Taproot could make a transaction in a Lightning Network channel, a peer-to-peer transaction, or a sophisticated smart contract become indistinguishable. Anyone monitoring one of these transactions would see nothing but a peer-to-peer transaction. It’s worth noting, though, that this doesn’t change the fact that the wallets of the initial sender and final recipient will be exposed.”

However, this isn’t fairly true… but. The Voltage article clarifies, “Does this mean that lightning channels are now unidentifiable on the blockchain? Well, the answer is ‘yes’ for private channels and ‘not quite yet’ for public channels.”

BTC worth chart for 01/04/2021 on Gemini | Source: BTC/USD on TradingView.com

Private And Public Lightning Network Channels

What’s the issue? Well, the community doesn’t announce the creation of personal channels. The public ones, alternatively:

“Unfortunately, even when we do conceal the channel openings on the blockchain, the present specification of the lightning protocol requires nodes to broadcast the small print of the funding transactions when saying their channels.

This may appear counterintuitive at first, however it’s additionally a sublime technique to stop nodes spamming the community with pretend channels.”

Related Reading | How Big Is Bitcoin’s Lightning Network? The Answer Will Surprise You

Also, let’s bear in mind that surveillance agency Chainalysis already introduced a Lightning Network-related service. We ought to assume there are “sybil nodes surveilling the network”. And that “With enough hostile nodes” a nasty actor might paint “a fairly detailed picture of the flow of funds”. Well, Taproot has a sublime resolution for that:

“Taproot’s introduction of Schnorr signatures paves the way for a type of smart contract called Point Time Locked Contracts (PTLCs). PTLCs operate in the same manner as HTLCs by allowing payments to be identified by nodes, but PTLCs come with a handy feature of being able to randomize its identifier with each hop thereby making it impossible for nodes to correlate the traffic of sending and receiving nodes.”

Understand that “Taproot is a door that opens many other doors”. It’s a brand new toolkit with which builders everywhere in the world will create new options and enhancements. The data this text comprises is only the start, the low-hanging fruit that we are able to see from our benefit level. Remember what Marty Bent mentioned, “these benefits aren’t going to be immediate.” The Taproot-enabled stage of Bitcoin is simply beginning.

Featured Image by Cooper Baumgartner on Unsplash | Charts by TradingView

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