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Why is there so much controversy surrounding the Taproot Bitcoin update?


On January 14, version 0.21.0 of Bitcoin Core, the most popular client of the Bitcoin network, was released. In addition to various innovations and improvements, it includes the final version of the Schnorr / Taproot code, an update designed to improve the privacy and scalability of the network, as well as coin interchangeability.

The immediate timeline for activating the solution has not yet been determined and the activation logic required for launching is missing. In the coming months, developers may include it in one of the upcoming Bitcoin Core interim releases.

Before Taproot was included in Bitcoin Core, its code was studied by more than 150 developers for several years, and as of the end of December, almost all the largest mining pools or more than 90% of the hashrate had signaled in favor of the update.

For bitcoin, whose history has known many divergent views on technical issues, this is a rather rare occurrence. The developers also demonstrated the unity of views after the recent statements of the creator of the Blockchair service Nikita Zhavoronkov, who suggested that Taproot not only does not increase the privacy of transactions, but rather, on the contrary, reduces it.

Key

  • Blockchair lead developer Nikita Zhavoronkov argues that a future update to Bitcoin Taproot poses a potential privacy threat.
  • The Bitcoin Core developers strongly disagree with him and state that in the long term, the benefits of Taproot are much greater than the possible harm.

Arguments against Taproot

Zhavoronkov listed the reasons why Taproot threatens the privacy of bitcoin in a document published in late November 2020. He urged developers to refuse to activate this solution.

As you know, the nodes deployed in the Bitcoin network track the outputs through which funds can be sent when performing transactions. These are known as unspent transaction outputs (UTXO). For example, Alice has two bitcoins, one of which she wants to send to Bob. When a transaction is carried out, the UTXO is split, in which the coins belonging to it are located: 1 BTC goes to Bob, another 1 BTC is sent back to Alice to the so-called change address.

Taproot activates new rules (scripts) that outwardly differ from existing scripts such as the mechanism for signing transactions using private keys or UTXO scripts.

According to Zhavoronkov, coins locked in such scripts will stand out from the rest, which will make it easier for analytical companies to determine the recipients of funds.

He cites bech32 as an example, the native SegWit address format (starting with “bc1”). In case the recipient has upgraded to SegWit and uses this format, the sender’s wallet continues to create change addresses of the same type as initially (starting with “1”).

It will look like this:

Now you can establish that 1BitcoinAddress11111 and 1BitcoinAddress3333333 belong to the same person (sender). This allows for clustering of addresses and carries a potential risk for both the sender and the recipient.

Zhavoronkov also points to a general “deterioration in the privacy” of bitcoin with the addition of each new type of scripts – from P2SH to P2WPKH and P2WSH, which appeared along with SegWit. Taproot will add P2TR and the technology will only be effective if it is 100% accepted by users and exchanges.

“Those who advocate Taproot and deny its negative impact on privacy imply that everyone will use Taproot, so in no time it comes down to the scenario ‘every user is using P2TR and every exchange is using P2TR.’ Unfortunately, this is a utopia. More than three years have passed since SegWit was activated, and it is still used in less than 50% of all transactions. It’s just not enough, “Zhavoronkov writes.

What Bitcoin Core is saying

Zhavoronkov’s arguments almost instantly met with fierce criticism from Bitcoin Core developers, primarily from the author of the technology Gregory Maxwell.

In a detailed comment on Reddit, the former CTO of Blockstream called Zhavoronkov an “intellectually dishonest coward” and, recalling the Blockchair developer’s close ties with Bitcoin Cash, urged him not to hide behind offensive Twitter posts, but to give direct answers to some questions.

Where is your Stop Schnorr Signatures campaign for BCash? They allow you to distinguish between wallets like any other new script, but you are silent about it. Where is your crusade against 4-of-5 multisig? Against P2SH? They are not there, ”Maxwell asks.

He also wonders why Zhavoronkov is not worried about privacy issues in cases with hard forks of “scam coins” or why he sees a threat to the privacy of bitcoin where another type of script is used in only 10% of transactions, but does not see it in altcoins, the number of transactions in which are significantly less (as, for example, in the case of Bitcoin Cash).

Maxwell noted that every new use of scripts and every new policy on multisig technology has a negative impact on user privacy. Moreover, according to him, users can themselves put their privacy at risk, for example, by driving their address into the block browser.

“Taproot greatly improves this situation, but since it is a new feature in itself, user privacy will be low until it is widely used. This is something that has always been discussed during the Taproot development process and has led to a number of design decisions, ”he added.

Maxwell also considers it extremely ironic that Zhavoronkov criticized precisely in connection with privacy issues, while his own site is centralized and can store users’ private data without their knowledge.

The Blockchair developer’s response was not long in coming:

“I don’t want to discuss anything on a censored subreddit, what’s the point? Twitter is neutral in this regard (unless you are Trump), so I prefer it, “Zhavoronkov replied, noting that a few months ago, a tool for assessing the level of privacy of transactions in the Bitcoin network appeared in Blockchair, while for Bitcoin Cash this option is still no.

Later, Zhavoronkov nevertheless entered into a deeper discussion with Maxwell, declaring his desire to protect the interests of ordinary users who carry out simple transactions, and not geeks fixated on complex and inaccessible technologies like the Lightning Network.

But, according to Maxwell, he never received detailed answers to his questions, and the presentation itself consists of unsubstantiated and false statements and is an example of a commercial conflict of interest.

Long-term perspective

Note that according to the official documentation, Taproot, in combination with Schnorr signatures, expands the capabilities of multisignature technology, increasing the group of transaction types that can be given the appearance of standard ones. Among them, in addition to P2PKH and P2WPKH schemes, i.e. single spending also includes channel closures in the Lightning Network and atomic swaps.

Peter Welle, who in October 2020 combined Schnorr signatures, Taproot and Tapscript technologies into one sentence, refrained from extensive discussions regarding criticism of Zhavoronkov, limiting himself to retweeting the thread of the German developer Lightning Network @ sebx2a. It says that claims about Taproot’s negative impact on privacy are an attempt to sow the seeds of doubt about the technology.

“The short-term negative consequences are well known, but the improvements over the long term are overriding them,” commented @ sebx2a on Zhavoronkov’s document.

Gleb Naumenko, an independent Bitcoin Core developer, also agrees with him.

“In short, Taproot can indeed lead to a loss of privacy, but on a small scale and only under certain conditions and specific attacks. In most cases, and as a result in general, Taproot is definitely a plus, both about privacy and flexibility of smart contracts, ”he said.

The hysteria of opponents of Taproot and the conspiracy theories, which, according to him, can be seen on the slides in Zhavoronkov’s presentation, were not only late for the discussion, but also did not dispose to constructiveness.

“There are not many opponents, however, of the public figures – this is only Nikita,” added Gleb Naumenko.

According to him, if users still have doubts, it is better to delve into the details on their own and draw their own conclusions. And if this is not possible, seek expert advice.



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