Kraken Intelligence has published a lengthy study on the impact Taproot could have on Bitcoin’s future.
Futuristic thinking on how Taproot will improve Bitcoin
In the 37-page long paper, at one point it reads:
“Taproot will translate to an overall smoother user experience and roll out the red carpet for vast innovation on the Bitcoin network”.
Analysts at Kraken Intelligence point out that updates to the Bitcoin protocol are decidedly rare, not least because of its considerable decentralization.
The previous update, SegWit, which took place in 2017 was controversial and difficult to bring to fruition, while in the case of Taproot the only hindrance was the relative slowness in its development and approval.
The SegWit debate resulted in a kind of “civil war” within the bitcoin community at the time, which ended with a hard fork that created Bitcoin Cash (BCH).
This time around, the community seems to strongly agree that Taproot will substantially improve the Bitcoin protocol.
This update may seem like just an incremental improvement to the protocol, but in fact according to Kraken Intelligence, it will revolutionize the Bitcoin network by greatly improving privacy, making bitcoin more fungible, improving network scalability, and creating a basic infrastructure to more easily deploy future updates.
Specifically, Kraken analysts write:
“At a high level, Taproot will enhance Bitcoin’s efficacy as a medium of exchange by allowing for more transaction throughput, upgrade the network’s core cryptography that ensures network security, and inspire more developers to work on Bitcoin by enabling complex DeFi smart contracts, among others”.
Bitcoin’s superior upgrade and adoption worldwide
Today, DeFi on the Bitcoin protocol is almost non-existent, whereas thanks to the increasing adoption of the Lightning Network, advanced decentralized finance services are likely to make an appearance on the Bitcoin network as well, and possibly even explode, given the increasing adoption of bitcoin worldwide.
The analysis argues that Taproot’s positive impact is already being reflected in the price now, attributing some of the nearly 10-fold increase in BTC’s value since March 2020 to the forthcoming innovation, given that it has long been known to be released.
According to analysts at Kraken Intelligence, however, the direct impact of Taproot on the price of BTC may not be significant.
This update makes the Bitcoin network significantly more attractive for the creation of DeFi protocols, which in turn could increase the demand for BTC.
Finally, they add:
“Either way, Taproot kills two birds with one stone by improving Bitcoin’s viability as a store of value and a medium of exchange, both of which have been contended by critics due to Bitcoin’s scalability concerns and highly volatile market price”.