BIP 341 (Taproot)

BIP 341 defines Taproot, bitcoin's most recent major protocol upgrade, activated as a soft fork at block 709,632 in November 2021. It introduced a new output type, pay-to-taproot, that combines Schnorr signatures with a tree of alternative spending scripts, letting complex contracts hide behind what looks like a simple payment.

Why it matters

Taproot advances bitcoin on privacy, efficiency, and capability at once. A multisig vault, a Lightning channel, and an ordinary single-key wallet can all produce identical-looking bc1p spends, shrinking the surveillance surface of the chain. Cooperative settlements use one compact signature regardless of how complicated the underlying agreement was, cutting fees exactly where custody is most sophisticated. The upgrade also demonstrated bitcoin's governance in action: activation followed years of open review and a miner signaling process, with adoption by wallets and services accumulating gradually in the years since.

How it works

A Taproot output is a single public key, but that key can secretly commit to a Merkle tree of scripts, the structure defined alongside BIP 341 in the tapscript rules of BIP 342. The happy path, where all parties agree, spends with one Schnorr signature and reveals nothing else. Only in a dispute does the spender reveal the specific script branch being used, and even then the other branches stay hidden. Addresses use the Bech32m format from BIP 350. For the gold comparison, Taproot marks the widening capability gap between the assets: gold's contract layer will always live in courts and custodians, while bitcoin keeps absorbing agreement itself into the asset.