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What is Taproot?

Understand what Taproot is: Bitcoin upgrade that improves privacy, efficiency, and flexibility using Merkle trees and Schnorr signatures. Advanced technical guide with SegWit comparisons.

Published on November 27, 2025
#bitcoin#taproot#merkle tree#privacy#schnorr#segwit#mast#advanced

What is Taproot?

Introduction

Taproot is one of the most important upgrades to the Bitcoin protocol since SegWit. Implemented in 2021, Taproot introduces significant improvements in privacy, efficiency, and flexibility through Merkle trees, Schnorr signatures, and MAST structure. This guide will explain what Taproot is, how it works, and why it represents an important advance for Bitcoin.

Important: This is an advanced level guide. We assume basic knowledge of Bitcoin scripts, transactions, SegWit, and cryptography concepts. If you're a beginner, we recommend first understanding SegWit and scripts before advancing to this technical content about Taproot.

By the end of this guide, you'll understand how Taproot works, how it improves privacy through Merkle trees, how it increases efficiency, and how it compares to SegWit.

What Is Taproot?

Basic Concept

Taproot is a Bitcoin protocol upgrade that improves privacy, efficiency, and flexibility of transactions using Merkle trees and Schnorr signatures.

Main components:

  • Schnorr Signatures: New digital signatures that are more efficient
  • MAST (Merkleized Abstract Syntax Tree): Scripts organized in Merkle trees
  • Tapscript: New version of script language
  • Taproot Outputs: New output types (P2TR)

Activation:

  • BIP 340 (Schnorr Signatures)
  • BIP 341 (Taproot)
  • BIP 342 (Tapscript)
  • Activated in November 2021 (block 709,632)

Main goal:

  • Make all transactions look the same on blockchain
  • Improve privacy
  • Reduce size of complex transactions
  • Allow more flexible scripts

Why Was Taproot Created?

Problems Taproot solves:

1. Privacy:

  • Before: Complex transactions (multisig, etc.) were obvious on blockchain
  • Now: All transactions look like simple P2PKH

2. Efficiency:

  • Before: Complex scripts were large and expensive
  • Now: Only used script is revealed, not all possible scripts

3. Flexibility:

  • Before: Limitations on script types
  • Now: More flexibility with MAST

4. Costs:

  • Before: Complex transactions had high fees
  • Now: Lower fees for complex transactions

Merkle Trees in Taproot

MAST: Merkleized Abstract Syntax Tree

MAST (Merkleized Abstract Syntax Tree) allows organizing multiple scripts in a Merkle tree.

How it works:

Before (without MAST):

  • Complex script needs to reveal ALL possible paths
  • Example: 2-of-3 multisig needs to reveal all 3 public keys
  • Large size, low privacy

After (with MAST):

  • Scripts organized in Merkle tree
  • Only used script is revealed
  • Other scripts remain private
  • Smaller size, higher privacy

Simplified structure:

Transaction can be spent in 3 ways:
1. Simple signature (path 1)
2. 2-of-3 multisig (path 2)
3. Timelock + signature (path 3)

With MAST:
- If using path 1: only reveals path 1
- If using path 2: only reveals path 2
- If using path 3: only reveals path 3
- Other paths remain private in Merkle tree

Merkle Tree Structure

Example of MAST with multiple scripts:

Root (Taproot Output)
    |
    ├── Path 1: Simple signature
    |   └── Script: OP_CHECKSIG
    |
    ├── Path 2: 2-of-3 multisig
    |   └── Script: 2 pubKey1 pubKey2 pubKey3 3 OP_CHECKMULTISIG
    |
    └── Path 3: Timelock
        └── Script: <timestamp> OP_CHECKLOCKTIMEVERIFY OP_CHECKSIG

When spending:

  • If using path 1: only reveals script from path 1
  • Merkle tree allows proving path exists without revealing others
  • Other paths remain private

Advantage:

  • Privacy: others don't know other paths exist
  • Efficiency: only reveals what's needed
  • Flexibility: can have multiple spending paths

Taproot Output (P2TR)

Taproot output (P2TR - Pay to Taproot) is the new output type.

Simplified structure:

P2TR Output:
- Taproot public key (tweaked key)
- Can be spent in two ways:
  1. Simple spending path (spend path)
  2. Script path (script path via MAST)

Simple path:

  • Just Schnorr signature
  • Looks like simple P2PKH transaction
  • More private and efficient

Script path:

  • Uses MAST with multiple scripts
  • Reveals only used script
  • Other scripts remain private

Privacy: The Biggest Benefit

Privacy Before Taproot

Privacy problems before:

1. Multisig Was Obvious:

  • Multisig transactions revealed all public keys
  • Easy to identify as multisig
  • Easy to see how many signatures needed

2. Complex Scripts Visible:

  • Complex scripts were visible on blockchain
  • Timelocks, conditions, etc. were public
  • Anyone could see business logic

3. Behavior Analysis:

  • Easy to analyze usage patterns
  • Identify transaction types
  • Track behavior

Example:

  • 2-of-3 multisig revealed 3 public keys
  • Anyone knew it needed 2 signatures
  • Easily identifiable on blockchain

Privacy with Taproot

How Taproot improves privacy:

1. Everything Looks the Same:

  • All Taproot transactions look like simple P2PKH
  • Can't tell difference between simple transaction and complex multisig
  • Much improved privacy

2. Only Used Script is Revealed:

  • If using simple path: looks like simple transaction
  • If using script: only used script is revealed
  • Other scripts remain private

3. Analysis More Difficult:

  • Hard to identify patterns
  • Hard to track behavior
  • Much better privacy

Example:

  • 2-of-3 multisig can look like simple transaction
  • Others don't know it's multisig
  • Others don't know how many keys exist
  • Maximum privacy

Privacy Effect in Practice

Before (2-of-3 Multisig):

Blockchain shows:
- 3 public keys
- 2 signatures
- Complete script visible
= Easy to identify as multisig

After (Taproot 2-of-3 Multisig):

Blockchain shows:
- 1 Taproot public key
- 1 aggregated Schnorr signature
- Looks like simple P2PKH transaction
= Impossible to identify as multisig

Improved privacy:

  • Multisig looks like simple transaction
  • Timelocks can be private
  • Complex scripts not obvious
  • Blockchain analysis much harder

Efficiency: Reducing Costs

Efficiency Before Taproot

Efficiency problems:

1. Large Scripts:

  • Complex scripts were large
  • Higher fees for complex transactions
  • Example: 2-of-3 multisig needed all 3 keys

2. Multiple Signatures:

  • Each signature was separate
  • Total size increased linearly
  • Higher fees

3. Unnecessary Data:

  • Revealed scripts that wouldn't be used
  • Revealed paths that wouldn't be taken
  • Unnecessary data on blockchain

Efficiency with Taproot

How Taproot improves efficiency:

1. Only Used Script:

  • Only reveals script that's actually used
  • Other scripts don't need to be included
  • Much smaller size

2. Aggregated Signatures:

  • Schnorr allows aggregating signatures
  • Multiple signatures become one
  • Much smaller size

3. Simple Path Efficient:

  • Simple spending path is very efficient
  • Just 1 Schnorr signature
  • Smaller than traditional P2PKH

Size comparison:

Before (2-of-3 Multisig):

  • ~200 bytes for script
  • ~140 bytes for 2 signatures
  • Total: ~340 bytes

After (Taproot 2-of-3 Multisig):

  • ~64 bytes for aggregated Schnorr signature
  • Total: ~64 bytes (if using simple path)
  • Or ~150 bytes (if using script path)

Reduction: 50-80% smaller!

Efficiency Benefits

Practical benefits:

1. Lower Fees:

  • Smaller transactions = lower fees
  • Especially for complex transactions
  • Significant savings

2. More Transactions per Block:

  • Smaller transactions fit more per block
  • Higher throughput
  • More efficient network

3. Less Data on Blockchain:

  • Only necessary data is stored
  • Blockchain grows slower
  • More efficient nodes

Comparisons with SegWit

SegWit vs Taproot

SegWit (2017):

  • Separated witness data (signatures)
  • Reduced transaction size
  • Didn't improve privacy significantly
  • Scripts still visible

Taproot (2021):

  • Dramatically improves privacy
  • Reduces size even more
  • Hides complex scripts
  • Aggregated signatures

Output Structure

SegWit Outputs:

P2WPKH (Pay to Witness Public Key Hash):

OP_0 <20 bytes: witnessPubKeyHash>

P2WSH (Pay to Witness Script Hash):

OP_0 <32 bytes: witnessScriptHash>

Taproot Output (P2TR):

OP_1 <32 bytes: taprootPubKey>

Differences:

  • Taproot uses OP_1 (not OP_0)
  • Taproot uses public key directly (not hash)
  • Taproot different structure

Privacy

SegWit:

  • ✅ Improved efficiency
  • ❌ Didn't improve privacy significantly
  • ❌ Scripts still visible
  • ❌ Multisig still obvious

Taproot:

  • ✅ Improved efficiency much more
  • ✅ Dramatically improved privacy
  • ✅ Scripts can be private
  • ✅ Multisig looks like simple transaction

Efficiency

SegWit:

  • ~40% reduction in size
  • Witness separated
  • Lower fees

Taproot:

  • ~50-80% reduction for complex transactions
  • Aggregated signatures
  • Only used script
  • Even lower fees

Compatibility

SegWit:

  • Compatible with legacy transactions
  • Type coexistence
  • Gradual migration

Taproot:

  • Compatible with SegWit and legacy
  • Type coexistence
  • Gradual migration possible

Schnorr Signatures

What Are Schnorr Signatures?

Schnorr signatures are a different type of digital signature than ECDSA signatures used before.

Advantages:

1. Linear Aggregation:

  • Multiple signatures can be aggregated into one
  • Multisig becomes single signature
  • Much smaller size

2. Faster Verification:

  • Verification of aggregated signatures is faster
  • Batch verification possible
  • More efficient

3. Privacy:

  • Aggregated signature looks like simple signature
  • Doesn't reveal how many signatures were aggregated
  • Multisig looks like simple transaction

Simplified example:

  • 2-of-3 multisig with ECDSA: 2 separate signatures (~140 bytes)
  • 2-of-3 multisig with Schnorr: 1 aggregated signature (~64 bytes)
  • ~50% reduction in size

How Aggregation Works

Simplified process:

1. Each Participant Signs:

  • Each participant creates partial signature
  • Partial signatures created independently

2. Aggregation:

  • Partial signatures combined mathematically
  • Result: 1 unique signature

3. Verification:

  • Verification uses aggregated public keys
  • Looks like simple signature verification
  • Works like single signature

Advantage:

  • Blockchain sees only 1 signature
  • Doesn't know it's multisig
  • Maximum privacy

Tapscript

What Is Tapscript?

Tapscript is a new version of Bitcoin script language introduced with Taproot.

Main changes:

1. New Opcodes:

  • OP_CHECKSIGADD: For more efficient multisig
  • Better stack operation support
  • Optimized opcodes

2. Simplifications:

  • Some operations simplified
  • More efficient than traditional script
  • Better for MAST

3. Compatibility:

  • Most traditional scripts work
  • Gradual migration possible
  • Doesn't break compatibility

Tapscript Examples

Multisig with Tapscript:

Before (traditional script):

2 pubKey1 pubKey2 pubKey3 3 OP_CHECKMULTISIG

After (Tapscript):

pubKey1 OP_CHECKSIG
pubKey2 OP_CHECKSIGADD
pubKey3 OP_CHECKSIGADD
2 OP_NUMEQUAL

Advantage:

  • More flexible
  • More efficient
  • Better for MAST

Practical Benefits

For Users

Direct benefits:

1. Improved Privacy:

  • More private transactions
  • Harder blockchain analysis
  • Less traceable behavior

2. Lower Fees:

  • Smaller transactions = lower fees
  • Especially for complex transactions
  • Real savings

3. Faster Transactions:

  • Faster verification
  • More efficient processing
  • Better experience

For Developers

Technical benefits:

1. More Flexible Scripts:

  • MAST allows multiple paths
  • More complex scripts possible
  • More design options

2. Privacy by Default:

  • Better privacy without extra work
  • Multisig looks simple automatically
  • Less worry about privacy

3. Efficiency:

  • More efficient code
  • Less data on blockchain
  • Better performance

For the Network

General benefits:

1. Higher Throughput:

  • Smaller transactions fit more per block
  • More efficient network
  • Greater capacity

2. Smaller Blockchain:

  • Slower growth
  • More efficient nodes
  • Less storage needed

3. General Privacy:

  • More private network
  • Harder analysis
  • Bitcoin more resistant to censorship

Use Cases

Multisig

Before:

  • Multisig was obvious on blockchain
  • All public keys visible
  • Easy to identify

After (Taproot):

  • Multisig looks like simple transaction
  • Maximum privacy
  • Maximum efficiency

Lightning Network

Benefits for Lightning:

  • More private Lightning channels
  • Smaller on-chain transactions
  • Lower cost to open/close channels

Simple Smart Contracts

Benefits:

  • Contracts can have multiple paths
  • Only used path is revealed
  • Privacy and efficiency

Timelocks and Conditions

Benefits:

  • Timelocks can be private
  • Complex conditions hidden
  • Private business logic

Limitations and Considerations

Limitations

1. Gradual Adoption:

  • Not all wallets support yet
  • Gradual migration needed
  • Coexistence with SegWit and legacy

2. Compatibility:

  • Old wallets don't support
  • Need to update software
  • Transition takes time

3. Complexity:

  • More complex than simple transactions
  • Developers need to learn
  • Learning curve

Considerations

1. Privacy Not Perfect:

  • Taproot improves privacy, but not perfect
  • Other techniques can still leak information
  • Privacy is improved, not guaranteed

2. Simple Path vs Script:

  • Simple path is more private
  • Script path reveals more information
  • Design choice matters

3. Future Analysis:

  • Analysis techniques may evolve
  • Relative privacy, not absolute
  • Taproot is improvement, not perfect solution

Frequently Asked Questions

Is Taproot mandatory?

No. Taproot is optional. Legacy, SegWit, and Taproot transactions coexist. You can choose to use Taproot or not.

Do I need to update my wallet?

Depends. To use Taproot, you need wallet that supports it. To receive from Taproot transactions, may not need. To spend, need support.

Does Taproot break compatibility?

No. Taproot is fully compatible. Old transactions continue working. Taproot just adds new transaction types.

Does Taproot improve fees?

Yes, especially for complex transactions. Simple transactions may have similar fees. Multisig and complex scripts have significantly lower fees.

Does Taproot completely solve privacy problems?

Not completely, but improves a lot. Privacy is dramatically improved, but not perfect. Other techniques can still leak some information.

Can I use Taproot now?

Yes, if your wallet supports it. Many wallets already support Taproot. Check your wallet's support before using.

Conclusion

Taproot represents one of the most important improvements to the Bitcoin protocol since SegWit. Through Merkle trees (MAST), Schnorr signatures, and Tapscript structure, Taproot significantly improves privacy, efficiency, and flexibility of Bitcoin transactions.

The main points you need to understand are:

  1. Taproot dramatically improves privacy - All transactions look simple, even complex multisig
  2. MAST organizes scripts in Merkle trees - Only used script is revealed, others remain private
  3. Schnorr signatures allow aggregation - Multiple signatures become one, reducing size
  4. Improved efficiency - Smaller transactions, lower fees, especially for complex transactions
  5. Compared to SegWit - Taproot goes further, improving privacy beyond efficiency
  6. Compatible and optional - Coexists with SegWit and legacy, gradual adoption

Taproot is a demonstration of Bitcoin's evolution process. Through careful updates and community consensus, Bitcoin continues improving without breaking compatibility or changing fundamentals.

The privacy improvement is particularly important. By making all transactions indistinguishable on blockchain, Taproot makes it much harder to analyze behavior and track Bitcoin usage. This strengthens censorship resistance and improves overall network privacy.

The efficiency improvement is also significant. By reducing size of complex transactions by 50-80%, Taproot allows more transactions per block, lower fees, and blockchain that grows slower. This benefits the entire network.

If you want to understand the latest improvements to Bitcoin, Taproot is essential. It's a complex technical update with clear practical benefits: more privacy, lower cost, and more flexibility. As more wallets and services adopt Taproot, these benefits will become increasingly accessible to all users.

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