2020 was a year characterized by the COVID-19 pandemic. In 2021, the problem tried to be solved by administering vaccines. But the solution seems not to have been entirely effective, since virus mutations and new variants of the disease manage to evade attempts to stop it. Similarly, Bitcoin is constantly changing, many of which are aimed at evading attempts to stop it or attack its essence.
In line with this It is possible to mention the one who, perhaps, has been the most important of the changes: Taproot. This improvement was the great protagonist of Bitcoin’s 2021. It provided the network with better tools in terms of privacy and efficiency, which were highly anticipated, both by the user community and by programmers.
But while this was the most striking of the changes, it was not the only one. For example, in 2021 other improvements were included in terms of privacy and even a type of smart contract. This opens the way for new implementations that the Bitcoin software will be able to offer in the coming year 2022.
Bitcoin Core and its version change
A change (of a purely visual nature, since it has no implication in the code) that occurred in the Bitcoin software was modification of the version numbering.
Every so often new versions of the Bitcoin Core client (Bitcoin source code) are released, which used to be used under the 0.21 format, for example, corresponding to the penultimate version. However, in the last modification, it was decided to change to 22.0.
This is not a minor fact. At the software development level, the fact that an application version starts at 0 indicates that the program is still in the development phase (commonly known as the “beta phase”). The evolution of the new version of Bitcoin Core, now 22.0, denotes instead a more mature software known as the “release” version.
Officially, the reason for the modification in the nomenclature was not known. However, this was one of the versions with the most changes, in which general support for the aforementioned Taproot update was included.
Taproot, the great evolution for Bitcoin
When talking about evolution in the Bitcoin protocol, a large part of this note should be dedicated to Taproot. Confirmed by a popular vote of the miners in June, the arrival of this enhancement to Bitcoin was decided for November, at block 709,632. Taproot was activated on November 14 and the ecosystem is already beginning to use and benefit from it.
Just before its arrival, some developers had to race against the clock to solve a problem with the transactions that made use of Taproot, in this case on Neutrino, a protocol used within the Bitcoin Lightning network.
With Taproot, what is known as Schnorr signatures came to Bitcoin, with which they want to supplant the ECDSA signatures. The improvement here involves aspects of privacy, efficiency, and scalability.
When operating, this new type of cryptographic signature allows transactions – whether single or multi-signature – to be indistinguishable from each other. This means that multi-signature protocols can improve your privacy systems.
At the same time, thanks to efficient use of resources, multi-signature transactions become less burdensome, which can translate into lower fees.
Along with Taproot also came a new address system known as bech32m or SegWit v1. They are not the replacement of the native SegWit, which is now known as v0, but rather a new SegWit address model with support in Taproot. These types of addresses are known as P2TR or Pay to Taproot. Wallets like Trezor and Ledger have already started supporting these types of addresses.
A more private and secure Bitcoin
With the arrival of Taproot there were improvements in the field of privacy and now, thanks to a new system known as MuSig2, multi-signature transactions will have higher levels of privacy.
As detailed by the developer Jimmy Song, in a publication made last November, Taproot solves many problems on how to safeguard and recover stored bitcoins. Song explains that, through the new multi-signature systems, the signer does not need to know all the information of the public key to which he is signing. Bitcoin users can distribute keys to their friends, without them knowing which address they belong to, in order to create an alternate recovery system.
Too there were other advances in terms of privacy not related to Taproot, such as the elimination of support for Tor v2 nodes, the old version of this network, to make way for version v3.
In addition to this, in Bitcoin Core 22.0 support for I2P or “Invisible Internet Project” was added. This basically works as a distributed internet connection network which, unlike TOR and its onion routing, segments the connection into chunks. In this way, the link and information are divided among all the actors within the network, in such a way that the connections are untraceable. This allows to have more private Bitcoin nodes.
Smart contracts in Bitcoin
Taproot did not bring smart contracts to Bitcoin, but it did bring a number of benefits that enable execute transactions under certain conditions, as in a smart contract. It can be said that these have existed in Bitcoin for a long time, however, their programming and execution is much more complex.
Among these new features are Scriptspends. Jimmy Song has explained that they allow you to “program” spending parameters when sending bitcoins, such as how long the stored BTC should last before being spent.
One of the applications that the aforementioned developer sees for this type of protocol is inheritance. Bitcoiners, for example, will be able to define how long the BTC will be blocked, as well as the number of signatures required to claim them.
Scriptspends were not the only protocols that allow advanced orders that came to Bitcoin in this 2021. Since last year there was talk of discrete registration contracts or DLC for its acronym in English. These make it possible to use oracles, which provide external information from the blockchain, which opens a new panorama of possibilities.
Last March it became known that a DLC contract was executed using 3 different sources of information (oracles). In this case, it was about contracts related to bitcoin futures. Each oracle provided information regarding the price of BTC.
This makes it possible to emulate, in some way, decentralized finance platforms (DeFi) that operate with derivatives of cryptocurrencies. In a very particular way, DeFi came to Bitcoin.
In relation to this, the platform dedicated to the development of this type of contract, also launched a portfolio for the administration of DLC contracts and a system that allows any user to create their own oracles, either on the price of bitcoin. , sports betting, etc.
In all this topic of smart contracts, there was an important milestone that, due to its little use, until now, could go unnoticed. This was Sapio’s launch. It is a scripting programming language, which allows the creation of automated transactions, which opens the door to the possible creation of smart contracts much more complex than those currently allowed by the Bitcoin protocol.
Atomic swaps with Bitcoin
Bitcoin is decentralized, but exchanging it for other cryptocurrencies rarely is. Resorting to centralized entities for the exchange of crypto assets can go against the values of independence of the ecosystem. This is where the need for atomic swaps arises. They are decentralized systems that allow the exchange of cryptocurrencies with each other.
2021 was the year that Bitcoin and Monero atomic swaps started to grow thanks to the new implementations of the protocols developed by the COMIT company. This type of exchange without intermediaries takes years of development.
In 2017, the first of these exchanges began to be carried out, between BTC and ETH, but it was not until last year that the first real atomic exchanges were achieved. By 2021, this market began to see its first customers.
Some developers get off the Bitcoin boat
One piece of news that closed the year and in a certain way worried the bitcoiner community was that now there are fewer maintainers of the Bitcoin source code (Bitcoin Core). There are only two left: Marco Falke and Michael Ford. This after the departure of Samuel Dobson on December 10, which added to the retirement of Jonas Schnelli, who resigned last October.
It is worth differentiating between bitcoin developers and maintainers. Bitcoin is developed by and for the community. Any capable programmer can develop enhancements for Bitcoin. The maintainers, for their part, act as the jury, when verifying and accepting the different modifications. In order for a proposal to be finally accepted in the source code, it must be initially presented as a BIP (Bitcoin Improvement Proposal) for later discussion and final approval or rejection.
Maintainers are not necessarily tasked with bringing improvements to Bitcoin, but only serve as maintainer. Although, after the news, there was speculation about a possible centralization in decisions about the main client of the cryptocurrency, Bitcoin Core, it should be clarified that there are other personalities that are still active. They, while not operating as maintainers, have access to the source code. These include Pieter Wuille, Wladmir J. van der Laan, and Hennadii Stepanov.
A Bitcoin that evolves
2021 was a year of evolution for Bitcoin as a social phenomenon, from El Salvador adopting it as an official currency to the birth of the first exchange-traded funds in the United States along with the new all-time high achieved this year.
The statistics of bitcoin adoption are on the rise, and after this growth the evolution of the Bitcoin source code has not lagged behind, with Taproot being the highest milestone achieved in Bitcoin this year. This pending the evolution of scripts in Bitcoin that allow the development of complex smart contracts.
It is worth noting that all the milestones achieved in Bitcoin in 2021 were made on the main client known as Bitcoin Core, which runs in more than 99% of all nodes nowadays. The rest of the clients are forks of the original Bitcoin Core code.
2022 Opens as a Window of Possibilities for Bitcoin Software, being the implementation of more complex smart contracts on the network, one of the most anticipated cases.