Taproot represents the first major upgrade to Bitcoin since SegWit was implemented in 2017. It comprises three Bitcoin improvement proposals (BIPs), and will improve Bitcoin's functionality. Taproot improves both privacy and network efficiency, making Bitcoin transactions safer. More complex transactions will be quicker to send, thanks to the fact that with Taproot, the wallet no longer needs to send the often extensive history of transactions which preceded the one being spent.
BIP 340 introduces Schnorr Signatures, which offers privacy and security advantages over ECDSA (i.e., elliptic curve digital security algorithm). As with ECDSA, Schnorr signatures use elliptic-curve cryptography (ECC), but offers numerous advantages over ECDSA regarding efficiency, storage and privacy.
The most notable improvement realized through Schnorr signatures is key aggregation, which eliminates the requirement for multiple public keys and signatures.
Schnorr signatures improve digital transactions by enabling multiple parties to merge their public keys into one and create a single signature for a shared message. This process reduces the need for multiple signatures and public keys, making transactions more efficient, saving space, and streamlining the verification process.
This new script can be used to generate Unspent Transaction Outputs (UTXO) that can be spent by the private key owner, or anyone else who can fulfill the requirements of any script within the Merkle tree.
BIP 342 is an update to the Bitcoin scripting language that allows nodes to create and validate P2TR outputs. These scripts, known as 'Tapscript,' are used to verify Taproot transactions and Schnorr signatures.
Taproot brings numerous benefits to Trezor users, including enhanced privacy, improved efficiency, and an expanded developer toolkit. By introducing MAST, complex transactions like multisig and Lightning network operations become harder to trace, increasing privacy. With Schnorr signatures and key aggregation, multiple public keys and signatures can be combined, leading to smaller transaction sizes, lower fees, and better efficiency. Additionally, Taproot empowers developers to create more advanced Bitcoin applications, boosting network performance and offering higher privacy levels for all users.
First, ensure that your Trezor is running Firmware version 2.4.3 or higher. If not, please update the Firmware installed.