🌳 [Analysis] Taproot is coming: what it is, and how it will benefit Bitcoin - Aaron van Wirdum

Bitcoin ($BTC) based smart contracts are about to evolve via the Taproot softfork, a combination of Merkelized Abstract Syntax Trees (MAST) and the Schnorr signature scheme. Since 2012, Bitcoin's smart contracts have run on pay to script hashes (P2SH) which mask coin holdings, but reveal potentially compromising smart contract conditions (script) after the coin dispersal. MAST addresses this oversight by masking the script through a Merkle tree and root pairing. Smart contracts options (stems) are placed in a Merkle Tree with a corresponding Merkle Root. When a smart contract goes through, the root verifies the transaction, like in P2SH systems, but does not reveal the entire script, only the action undertaken. The rest of the script remains hashed in the Merkle Tree. Schnorr builds on MAST by masking the entire structure on the blockchain, making it appear as a regular transaction. By aggregating transactions, meaning the public keys and signatures, into 'threshold' keys and signatures, keys can be 'tweaked' to mask contracts as transactions. When a dispute arises, revealing the smart contract for what it is to the blockchain, Schnorr masks the relevant sensitive information via MAST while providing evidence to the blockchain for proper coin dispersal. Taproot, while still in development, adds unheralded layers of security for Bitcoin-based smart contracts.