Hey Stackers,

We constantly hear about Taproot and Schnorr Signatures, but how tangible is the real-world impact of these upgrades on average users and transaction fees? Let's take a closer look at why this upgrade is more than just a minor technical improvement—it's a significant leap for scalability and privacy.

1. Schnorr Signatures: The Key to Lower Fees

The core mechanic behind Schnorr enables MAST (Merkelized Abstract Syntax Trees). In practical terms:

• Data Reduction: Schnorr signatures are significantly shorter than the legacy ECDSA signatures. In multi-signature transactions, $N$ signatures can be "aggregated" into a single signature.
• Practical Application: Imagine a 2-of-3 multi-sig transaction. Under the old system, all 3 signatures had to be recorded on-chain. With Schnorr, these 3 signatures collapse into one aggregated signature. This means a dramatic reduction in the data size committed to the block, leading to lower fees for everyone, even if you are just sending a simple, single-signature transaction!

2. Taproot and Privacy (The Magic Trick)

Taproot (built upon Schnorr) introduces the capability to hide the different spending paths of a UTXO.

• The Simple Path (Single Signature): If your transaction is spent as a standard transaction (like a P2PKH), no evidence remains that this UTXO could have been spent more complexly. This benefits privacy, as your transaction is indistinguishable from a simple spend.
• The Complex Path (Script Paths): If you execute a complex spending path (e.g., a 2-of-3 Multi-sig), the script needed for that spending path is committed to the block. The crucial point here is: if that script is never used, it leaves no trace whatsoever!

Practical Conclusion:

Taproot makes complex transactions (like those used in Lightning Network or complex multi-sig schemes) look identical to simple, standard transactions on-chain. This "uniformity" offers two massive advantages:

1. Lower Fees: For simple transactions due to shorter signatures.
2. Better Privacy: By obscuring the existence of complex spending scripts.

Question for the Community:

Do you anticipate that the increased adoption of Taproot outputs (P2TR) will have a noticeable impact on overall network fees in the near term, or do we still require broader adoption before the effect becomes truly tangible?

--- #tech #lightning #btc