Bitcoin’s Potential as a Collateral Class

Bitcoin’s Taproot update has finally begun its Speedy Trial.

Today’s difficulty adjustment kicks off the first phase of activation for the upgrade, Bitcoin’s biggest in years which (among many things) will make Bitcoin multi-signature transactions cheaper, more private and easier to deploy. 

Starting today, miners who wish to adopt the upgrade can signal their support by including special data in the blocks they mine called a “signal bit.” If 90% of the blocks mined during this difficulty period include the Taproot signal bit (or any of the other roughly two week difficulty periods that occur between now and the August 11 timeout), then the upgrade is “locked in” for activation in November of this year.

Related: Crypto Long & Short: Bitcoin’s Potential as a Collateral Class

Unlike a centralized network that can be changed unilaterally, a decentralized network like Bitcoin requires coordination from a global userbase to make substantial changes to its code, and it also requires intensive coordination among stakeholders to deploy these changes (as evidenced by the months-to-year-long discussions, not on the uncontroversial upgrade, but on how to bring it online).

Taproot when?

So if everything goes as planned, Taproot will be live on Bitcoin’s blockchain before the holiday season. If the network doesn’t achieve the 90% threshold before the timeout, then the upgrade fails and we are back to the drawing board.

This isn’t likely, though. Miners have already pledged their support for Taproot, so it’s really a matter of when, rather than if, said Poolin VP Alejandro del la Torre, who ran the original mining pool survey to gauge Taproot support among the mining community

“I am confident it will happen,” he told CoinDesk, adding that “up to now, there has not been one complaint from our miners at Poolin about our wish to upgrade to Taproot.” 

Related: Cryptotwitter Shows No Respect for Age in Responding to Munger’s Bitcoin Diss

Suredbits and Bitcoin Core developer Ben Carman told CoinDesk that the network will “pass [the signaling threshold] most likely in the second difficulty period.”

“Previous soft forks, besides SegWit, all activated near the very beginning of their activation window, and that was all with needing 95% of miners – now we only need 90%,” he said.

Not as surefire but still voicing similar sentiments, prolific Bitcoin developer Matt Corrallo said he is “cautiously optimistic.”

Anyone wishing to track the percentage of Taproot-signalled blocks per period can visit Taproot.watch

Fork in the road

A release candidate for Bitcoin Core 0.21.1, which contains Speedy Trial’s activation logic, is now available on GitHub.

Two weeks before this software release for Bitcoin Core (the client that runs ~98% of the Bitcoin network), Bitcoin developer Bitcoin Mechanic released an alternative Taproot activation client in concert with others like renowned yet controversial Bitcoin developer Luke Dashjr. 

This version is compatible with Bitcoin Core up to a point; if miners signal, then Taproot activates network wide no issue, but if miners don’t, this alternative client includes a “flag day” for mandatory activation in October of 2022.

This “user activated soft fork” (UASF) scenario allows node operators to reject blocks from miners who don’t signal for Taproot to essentially force the upgrade.

Bitcoin stakeholders couldn’t come to consensus on whether or not to include a UASF in Bitcoin Core’s activation, hence the months of debate. Critics argued that there’s no need for such extensive deliberation, given that miners have shown no opposition to Taproot, unlike the way they did with SegWit (a 2016/17 upgrade which required the threat of a user activated soft fork to bring to fruition).

“People are shadow boxing casper right now lol,” Lightning Labs CTO Olaoluwa Osuntokun said at the time, suggesting the calls for a UASF come from “PTSD” from the SegWit saga.

Proponents of the UASF say that it’s necessary to reinforce the precedent that node operators ultimately decide upgrades, not miners. (Miners may run nodes and provide an necessary utility for the network, but shouldn’t have outsized sway, the argument goes.)

Judging by the data and sentiment we have now, though, it probably won’t have to come to a UASF, but we’ll know for sure come August.

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