Taproot is a Bitcoin upgrade (activated November 2021) that uses Schnorr signatures and MAST (Merkelized Alternative Script Trees) to make complex transactions look identical to simple ones on-chain. It improves privacy, reduces fees for multi-signature and smart contract transactions, and enables more expressive scripting.
What Is Taproot?
2 min read
The short version
Before Taproot, using Bitcoin's advanced features left visible fingerprints on the blockchain, anyone could tell a multisig from a simple payment. Taproot puts all possible spending conditions in a hidden tree, and when you spend, only the condition you actually used is revealed. Everything else stays private.
How It Works
Taproot combines three improvements: (1) Schnorr signatures (BIP 340), more efficient than ECDSA, enable key and signature aggregation. (2) Tapscript (BIP 342), an updated scripting language with new opcodes. (3) The Taproot construction itself (BIP 341), a MAST tree of spending conditions where the "key path" (a single aggregated public key) is the default. If all parties agree, they sign with one key and the transaction looks identical to any other single-sig payment. Only if they disagree and use a script path does any script become visible. Taproot addresses start with bc1p and use Bech32m encoding.
A 3-of-5 multisig with Taproot vs. bare multisig
A company treasury requires 3-of-5 signers. Without Taproot: the transaction reveals all 5 public keys and 3 signatures (expensive and privacy-leaking). With Taproot: in the happy path, signers aggregate their keys off-chain into a single Schnorr signature, the on-chain transaction looks like a normal single-sig payment (32-byte key, 64-byte signature). Cost: ~58 vbytes vs. ~250+ vbytes for bare multisig. Only if signers disagree does a fallback script path get revealed.
What People Get Wrong
Taproot enables smart contracts like Ethereum
Taproot expands Bitcoin's scripting but within its intentionally limited model. You cannot run arbitrary programs. It enables more expressive conditions (timelocks, hash locks, multi-sig variations), not Turing-complete smart contracts.
Taproot makes all transactions private
Taproot makes different transaction types look the same on-chain. It doesn't hide amounts, addresses, or the transaction graph. It's a scripting-privacy improvement, not full privacy.
Everyone needs to upgrade for Taproot to work
Taproot is opt-in. Only participants in a Taproot transaction need to use bc1p addresses. It coexists with legacy and SegWit transactions.
Keep Reading
Sources & Further Reading
- BIP-340: Schnorr Signatures
The specification for Schnorr signatures used in Taproot
- BIP-341: Taproot (SegWit v1)
Full Taproot specification covering key-path and script-path spending
- BIP-342: Tapscript
The updated scripting rules for Taproot transactions
Questions People Also Ask
- What percentage of transactions use Taproot?
- As of mid-2024, approximately 15-20% of Bitcoin transactions use Taproot outputs, growing steadily. Adoption accelerated with Ordinals/Inscriptions which rely on Taproot script paths.
- Is Taproot related to Ordinals/BRC-20?
- Yes. Ordinals inscriptions use Taproot's script-path spending to embed data. This was an unforeseen use case that generated significant debate in the Bitcoin community.
- Do hardware wallets support Taproot?
- Most major hardware wallets (Ledger, Trezor, Coldcard, BitBox) added Taproot support in 2022-2023. Check your firmware version for compatibility.