January 27, 2021 / Beginners

Why Does Taproot Bitcoin Update Bring So Much Controversy ?

bitcoin core

Version 0.21.0 of Bitcoin Core, the most popular client of the Bitcoin network, released on January 14. This includes the final version of the Schnorr/Taproot code to improve the privacy and scalability of the network, as well as coin interchangeability.

The immediate timeline for activating the solution has not yet been determined. Developers may include it in one of the upcoming Bitcoin Core releases in the coming months.

Recall, over 150 developers studied Taproot code for several years. Almost all the largest mining pools or more than 90% of the hashrate had signaled in favor of the update In December.

As for Bitcoin this is a fairly rare occurrence. The developers also demonstrated the unity of views after the recent statements of Blockchair creator, Nikita Zhavoronkov, who suggested that Taproot does not increase the privacy of transactions.

As you know, Bitcoin nodes track the outputs through which funds can be sent when performing transactions. These are the unspent transaction outputs (UTXO). For example, Alice has 2 BTC. She wants to send 1 BTC to Bob. When a transaction is carried out the UTXO is split. As a result, 1 BTC sends to Bob, another 1 BTC sends back to Alice to the so-called change address.

Taproot activates new rules (scripts) that differ from existing scripts such as the mechanism for signing transactions using private keys or UTXO scripts.

According to the researcher, coins locked in such scripts will stand out from the rest, which will make it easier for analytical companies to determine the recipients of funds.

He cites bech32 as an example like SegWit address format (starting with “bc1”). In case the recipient has upgraded to SegWit and uses this format, the sender’s wallet continues to create change addresses of the same type as initially (starting with “1”).

It will look like this:

Now you can establish that 1BitcoinAddress11111 and 1BitcoinAddress3333333 belong to the same person (sender). This allows for the clustering of addresses and carries a potential risk to both the sender and the recipient.

Note Bitcoin “deterioration in the privacy” with the addition of each new type of script – from P2SH to P2WPKH and P2WSH, which appeared along with SegWit. Taproot will add P2TR and the technology will only be effective if it is 100% accepted by users and exchanges.’

What’s About Bitcoin Core

CEO at Blockchair arguments almost instantly met with fierce criticism from Bitcoin Core developers, primarily from the author of the technology Gregory Maxwell.

In a detailed comment on Reddit, the former CTO of Blockstream called Zhavoronkov an intellectually dishonest coward and, recalling the Blockchair developer’s close ties with Bitcoin Cash. Maxwell urged him not to hide behind Twitter posts, but to give direct answers to some questions.

He also wonders why Zhavoronkov is not worried about privacy issues in cases with hard forks of “scam coins” or why he sees a threat to the privacy of Bitcoin where another type of script is used in only 10% of transactions but does not see it in altcoins, the number of transactions in which are significantly less (as, for example, in the case of Bitcoin Cash).

Maxwell noted that every new use of scripts and every new policy on multisig technology has a negative impact on user privacy. Moreover, according to him, users can themselves put their privacy at risk, for example, by driving their address into the block browser.

Maxwell also considers it extremely ironic that Zhavoronkov criticized precisely in connection with privacy issues, while his own site is centralized and can store users’ private data without their knowledge.

The Blockchair developer’s response was not long in coming:

“I don’t want to discuss anything on a censored subreddit, what’s the point? Twitter is neutral in this regard (unless you are Trump), so I prefer it, “Zhavoronkov replied, noting that a few months ago, a tool for assessing the level of privacy of transactions in the Bitcoin network appeared in Blockchair, while for Bitcoin Cash this option is still not.

Later, Zhavoronkov nevertheless entered into a deeper discussion with Maxwell, declaring his desire to protect the interests of ordinary users who carry out simple transactions, and not geeks fixated on complex and inaccessible technologies like the Lightning Network.

But, according to Maxwell, he never received detailed answers to his questions, and the presentation itself consists of unsubstantiated and false statements and is an example of a commercial conflict of interest.

Note that according to the official documentation, Taproot, in combination with Schnorr signatures, expands the capabilities of multi-signature technology, increasing the group of transaction types that can be given the appearance of standard ones. Among them, in addition to P2PKH and P2WPKH schemes, i.e. single spending also includes channel closures in the Lightning Network and atomic swaps.

And if users still have doubts, it is better to delve into the details yourself and draw your own conclusions. And if this is not possible, seek expert advice.

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