The first major Bitcoin upgrade in four years has been activated, with developers now able to add new features to improve privacy, scalability, and security on the Bitcoin blockchain—even with some Bitcoin already warning.
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Bitcoin’s price has soared over the past year, hitting an all-time high of around $69,000 per bitcoin this week in the run-up to the major root activation, however, the price of Ethereum and BNB from Binance, Solana, and Cardano has soared. In a much larger clip over the last 12 months.
The much-anticipated Bitcoin upgrade called Taproot was published early Sunday morning and will unlock the potential of Bitcoin smart contracts, helping Bitcoin to compete more directly with the likes of Ethereum, BNB, solana and cardano from Binance.
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“The upgrade could be a major turning point in scalability and innovation, as it combines the best of post-SegWit conservatism with the energy of new beginnings,” Ninos Mansor, partner at crypto investor Arrington XRP Capital, wrote in a report last month.
Bitcoin’s latest update, which includes so-called Schnorr signatures that allow more complex Bitcoin transactions to look like any other, is the first significant change to the protocol since the introduction of Segregated Witness (SegWit) in 2017. SegWit, which is designed to aid the Bitcoin scale, has been implemented in The climax of the so-called block size wars that saw the Bitcoin community split in two, with one side splitting off to create a payments-focused Bitcoin fork, known as Bitcoin Cash.
“After four years of preparation, Taproot is an uncontroversial proposal that leaves a scar tissue behind for block wars and shows the market that bitcoin can thrive while maintaining the spirit of extreme political stability,” Mansour wrote.
Since 2017, bitcoin has been increasingly seen as a store of value, comparable to digital gold than to a payments network. Mansor believes that this could change as the Bitcoin network is more able to compete with Ethereum, its smaller competitors, and even commercial payment networks such as Visa and Ripple’s XRP.
“While most of the market has focused on rapid innovations in the second layer of Ethereum, the climate of the second layer of Bitcoin is developing very quickly,” Mansour wrote, referring to projects built on top of existing blockchains that can speed up transactions and reduce costs by moving them off-chain. , adding: “Bitcoin could theoretically become a competitor to Visa, with new products revitalizing Bitcoin’s capabilities as a medium of exchange.”
Ethereum and its main competitors BNB, solana, and Binance’s cardano have seen their price skyrocket over the past year thanks to a growing interest in smart contracts, blockchain-based decentralized finance (DeFi) and non-fungible tokens (NFTs) – both built largely on top of the ethereum network. Many expect Binance’s BNB, solana, and cardano to increasingly steal Ethereum DeFi and NFT market share as competing blockchains vie for dominance.
Many in the crypto community previously predicted that Ethereum could eventually overtake Bitcoin as the most valuable cryptocurrency, with DeFi – the idea that traditional financial services could be replaced by blockchain-based protocols – and NFTs – using cryptographic technology to encode all kinds of digital media. And assets – help drive the adoption of Ethereum, and thus the price of the Ethereum tokens.
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Bitcoin’s Layer 2 Lightning Network, which speeds up and lowers the cost of bitcoin transactions, is often cited as an example of how bitcoin will compete with the likes of Ethereum, BNB, solana and cardano in the future from Binance.
“The price rally we’re seeing in bitcoin this week is more than just an increase in inflows — it’s the result of a combination of tailwinds that have been building up for some time,” Noel Acheson, head of market insights at major cryptocurrency broker Genesys, wrote in Comments via email.
“The Taproot upgrade, which enhances bitcoin smart contract functionality and transaction privacy, lowers transaction fees and makes Lightning easier and cheaper to use, all of which will boost bitcoin adoption,” Acheson added. “Moreover, it serves as a reminder that bitcoin is a new technology and not just a store of value.”
“The Bitcoin Taproot upgrade comes at an opportune time as development on the Bitcoin blockchain has accelerated rapidly this year,” Paolo Arduino, Bitfinex’s chief technology officer, wrote in an email comments.
“Taproot will provide more scalability, privacy, and smart contract functionality on the Bitcoin blockchain and significantly expand what has been possible so far. We can expect Taproot to unleash the power of the Lightning Network to bring true scalability to the Bitcoin blockchain, used in more complex operations.” .