What are the prospects for Bitcoin in 2021?
As the price of Bitcoin has just crossed a new all time high, the predictions of its next record are all the crazier. Bitcoin at $100,000? Bitcoin at $500,000? Anything seems possible.
But in concrete terms, what do we expect from Bitcoin in 2021? What improvements are planned? Will the market remain optimistic? How will regulators react to its growing adoption?
Bitcoin is above all a computer protocol, and anyone can propose Bitcoin Freedom to change its rules. These Bitcoin Improvment Proposals are reviewed, integrated into the source code and implemented if there is a consensus.
Bitcoin is not perfect, far from it. Future improvements to the network are eagerly awaited. It is a question of strengthening – again and again – its scalability, but also its confidentiality.
A Bitcoin transaction is a message, signed using the private key of its sender. The Schnorr authentication protocol is a new signature scheme for Bitcoin. It is lighter, more flexible and more confidential. At the moment, Bitcoin uses Elliptic Curve Cryptography (ECDSA).
Schnorr’s signatures provide the same level of security, with additional benefits. They are lighter, and can also be easily aggregated. Transaction sizes are expected to decrease by 30-75%.
Initially proposed in 2015 by Pieter Wuille, this enhancement will be integrated into Bitcoin Core version 0.21 under the code name BIP 340. Its activation will take effect during a soft fork, i.e. a change in the consensus rules of the Bitcoin protocol – these new rules will remain compatible with the previous ones.
Taproot is a much-anticipated feature, as it will make Bitcoin transactions more confidential.
The idea is to combine the signature aggregation proposed by Schnorr’s scheme with a new data structure, called MAST, to offend the contents of a Bitcoin script. Multi-signature transactions and the content of their conditions will thus be similar to classic transactions in the eyes of an outside observer.