Taproot Activation And The LOT Debate – Bitcoin Magazine

You’ve probably already heard about Taproot, the new proposed soft-fork upgrade for Bitcoin, which will introduce a new signing algorithm and an enhanced, more private and flexible scripting mechanism.

Now, while Taproot has been discussed for a long time, and its code has already been merged to Bitcoin Core, the actual upgrade has not yet taken place. That is, the changes were not yet activated and enforced by the network. The biggest question still left is how to coordinate the activation.

Coordinating Changes To Bitcoin

Why is coordination so important to get right? Well the way that Bitcoin soft forks work is that they introduce new rules to the consensus protocol, i.e., the rules by which a node decides whether a block is valid or not. This means that, in theory, if a node activates a soft fork alone, it finds itself at risk of rejecting blocks that all of the other nodes still accept, essentially forking itself off to another chain that no miners work on, and no users want to transact on.

Now, if a small portion of the nodes coordinates to activate a soft fork, they will find themselves at the same risk as above. They would still be able to transact with one another, assuming at least some miners will still dedicate work to mining its blocks, but they will lose a large part of the mining power, which will still be working on the un-forked chain, making their own fork less useful — since other nodes will not accept its transactions — and more vulnerable to 51 percent attacks.

It is only when the economic majority (nodes actively used for payment verification) of the network coordinates to enable the soft fork together that miners also find themselves at risk — as not upgrading means they might be working on a block which most users will reject, therefore making them waste resources on trying to get a mining reward which no one will accept.

Still, even when the economic majority of the network nodes has…

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