Pay-to-Taproot(P2TR): Next Evolution in Bitcoin Transactions

With the Taproot update on November 14, 2021, Pay-to-Taproot (P2TR), a sophisticated kind of Bitcoin output or transaction type, was unveiled. It is regarded as the most sophisticated method of Bitcoin money locking.

By merging elements of previous script types such as Pay to Public Key(P2PK), Pay To Script Hash, Pay-to-Public-Key-Hash (P2PKH), and Pay-to-Witness-Script-Hash (P2WSH), P2TR’s main idea is to provide a hybrid way to spending Bitcoin outputs. This improves privacy, efficiency, and flexibility by enabling a multitude of methods to spend Bitcoins.

How P2TR works

This is an explanation of how Pay-to-Taproot operates:

Locked Output Structure

• Usually, a P2TR output is locked to Q, which seems to be a single Schnorr public key.
• Nevertheless, this public key Q is actually a mix of a “real” public key (P) and a spending script-representing public key (M). The Merkle root of a list of other ScriptPubKeys is used to determine the key M.
• “Tweaked public key” is the term used to describe the public key in a P2TR locking script. A dedication to all other custom scripts that may be utilized to unlock the Pay-to-Taproot output is incorporated into this modifying. In essence, the hash of these customized scripts is the tweak value.
• Because P2TR public keys do not include the first byte that indicates the y-coordinate, they are 32 bytes long, which is somewhat less than earlier compressed public keys.
• The OP_1 version opcode is used to begin a Pay-to-Taproot locking script, and then this public key’s data is pushed.

Two Main Ways to Spend P2TR

Two Main Ways to Spend Pay-to-Taproot gives users the option to spend their money in one of two primary ways:

Key Path Spend (Default Method):

• With just a Schnorr signature from key P’s owner, this is the easier approach.
• The witness field, which stores signatures for Pay-to-Taproot inputs, has a single signature item when a key path expenditure takes place. The first step in creating this signature is to modify the private key that was used to generate the original public key.
• The output is unlocked if the signature matches the modified public key in the ScriptPubKey.
• On the blockchain, the key path spend transforms a complicated transaction into a straightforward, single-signature transaction.

Script Path Spend (Alternative Method):

• When the user must meet one of the various requirements included in a Merkle tree of scripts, this approach is employed.
• Time locks, multi-signature wallets, and other circumstances like those of smart contracts may be defined via these scripts.
• In particular, the Merkle tree combines complicated scripts into a Merkleized Abstract Syntax Tree (MAST).
• The witness field becomes more complicated when a script path spend happens, often including three or more items: a control block, the selected bespoke “leaf script,” and the script inputs (data elements to unlock the script).
• Data from the control block demonstrates that the leaf script was a component of the initial scripts used to generate the modified public key. If the control block verifies that the leaf script is encoded and that the script inputs meet the requirements of the leaf script, the output is unlocked.

Underlying Technologies:

P2TR uses a number of important technologies to accomplish its goals.

• Schnorr Signatures: Unlike the earlier ECDSA signatures, Pay-to-Taproot only employs Schnorr signatures, which are more efficient, provide better privacy, and can be aggregated. This implies that a single, cohesive signature may be created by combining separate signatures in a multisig arrangement.
• Merkleized Abstract Syntax Trees (MAST): Only the script used for spending is disclosed on the blockchain, even if MAST enables the bundling of sophisticated scripts. Unused expenditure conditions are kept confidential.
• SegWit (Version 1) Output: SegWit version 1 outputs include P2TR outputs. Because the ScriptSig field isn’t utilized to unlock P2TR outputs, their signatures are instead saved in the witness data.

Pay-to-Taproot Advantages

Pay-to-Taproot has a number of important advantages over earlier forms of Bitcoin transactions, including:

Enhanced Privacy

• This is a significant benefit.
• It becomes considerably more difficult for blockchain analysis tools to distinguish between different transaction types because all P2TR outputs appear the same on the blockchain, regardless of whether they are for a straightforward single-signature transaction or a sophisticated multi-signature configuration.
• The usage of the key path improves user privacy by preventing the disclosure of any further complicated spending circumstances. Even when a script path is utilized, other possible scripts remain hidden since only the particular script that was performed is made public.

Improved Efficiency

• The amount of data saved on the blockchain is decreased via Pay-to-Taproot.
• Because of Schnorr signature aggregation, complicated and multi-signature transactions use less block space and may have reduced transaction costs.
• As opposed to placing several scripts directly on an output, all expenditure conditions may be consolidated into a single 32-byte modified public key, conserving space.

Greater Flexibility

• Pay-to-Taproot gives users more options for how to spend their Bitcoins.
• It enables numerous spending conditions by permitting outputs to be locked to a basic public key and/or several bespoke locking scripts.
• Through MAST, this facilitates more expressive smart contract capabilities.

Address Format

• Format of the AddressP2TR addresses are encoded using the Bech32m format.
• A P2TR address is 62 characters long and always begins with bc1p. Although the checksum computation is slightly different, Bech32m is comparable to Bech32.

Although P2TR has numerous benefits, developers may find it more difficult to deploy and it does require wallets and software to enable Taproot. But it’s a “all in one” locking method that combines the features of earlier locking scripts.

Summary Table