So, what’s happening in Bitcoin? We will discuss all of this in today’s article and try to understand the roadmap of Bitcoin’s technology stack. Unlike other articles will be not focusing on the price of Bitcoin.
Ideas to improve scalability is already in works. It starts with an architectural change to the structure of the transactions which allows building more robust and optimized transactions, with lower fees. This is building blocks for off-chain payment solutions.
Segregated Witnessing(SegWit) transaction restructure is mainly a protocol update that separates the signature from the transactions data. When a transaction has been verified the signatures are no longer needed and therefore can be discarded. While the Segwit update is very helpful it was done through a soft fork, which means that the user does not need to use Segwit.
This is the first peer to peer payment system build on top of the bitcoin network known as a layer 2 solution. This is known as the Basis of Lightning Technology (BOLT) specification. Because it is built on Bitcoin, it does not require any consensus rules and serves as a way to off-load the transactions load from the bitcoin network. The lightning network is still in very early stages of development and users should understand the risk of losing their funds. The latest version of the Lightning Network Daemon is 0.5 which also contains neutrino, a bitcoin client that focuses on privacy. The CEO of Lightning labs, Elizabeth Stark, is very confident on the prospects of the lightning network. Many companies and projects including Bylls, BTCPay GloBee, BitRefill, and others are already using the lightning network to make a faster transaction.
One of the lesser talked about benefits is Proof of Stake. Essentially the Lightning network allows users to stake their Bitcoin in a channel and earn rewards when their channel is utilized by a payment.
Batching: Solving the scaling issue
Even though lightning network improves scaling, it doesn’t completely solve the scaling problem. This is where Batching comes in as it works differently. In layman terms, one transaction can be used to send money to more than one person.
To get a better grasp, let’s say one transaction of bitcoin takes 60 bytes of space. Due to the property of bitcoin transaction, if we add one more output to the transaction without doubling the size to 120 bytes. It only adds 20 bytes. As a business, you can batch transactions together and create a single input with multiple outputs, solving the scalability issue.
Merklized Abstract Syntax Tree improves smart contract handling and execution. It works by splitting the smart contract or the script code. When a branch is created it can be executed on the network without depending on other branches. Moreover, it also allows pruning un-executed branches. It also protects privacy by implementing smart private contracts which hide spending paths.
Schnorr signatures allows for the creation of a small signature with the help of aggregation. With it recently out of patent, it can be used in bitcoin transactions by aggregating and making signatures and multisig more private and smaller. When it comes to multiple transactions, the same method applies by making it aggregate in a block. The benefits are instant as it is easier to verify these aggregated signatures. Moreover, it can be used with other techniques for better efficiency and effectiveness.
Taproot & Graftroot
Taproot is a privacy tech for Bitcoin. It has a common use case where a key or signature can be used to make the payment. It also facilitates exceptional circumstances payment when needed. The use-case is to protect trivial payments that are done using smart contracts. creating alternative conditions with no penalty for spending. It works in off-chain only. The conditions can be created anytime and stored in off-chain. Also, the alternative conditions are hidden until they are required.
This is a method by which many transactions can be merged together. It improves privacy and offers better fee management. It also improves blockchain fungibility by making analysis hard.
Bitcoin is much more than the price associated with it. With continuous improvement, Bitcoin is cautiously and methodically improving without compromising decentralization and security.