Bitcoin has replaced the ECDSA encryption with the Schnorr Signatures, which provide more security and privacy to the network in their cryptography. The main goal of cryptography has always been to protect information and make it secure. However, complex functions such as multi-signature of transactions could be integrated into the Bitcoin network, in which it was very easy to see which transactions were being executed. Something that with the new Soft Fork known as Taproot, has been solved by making complex transactions see the network as if they were simple transactions.
Bitcoin cryptography and how it has changed
When sending certain information through a Blockchain, since it is money, it is necessary to be able to certify the authenticity of the origin and verify that the information has not been modified. Therefore, a digital signature system is used, which is based on a asymmetric cryptography in which each user has an associated key pair. The public key that is known to all users and is generated as a result of the private key and, on the other hand, the private key, which is only known by the owner. Both are complementary, so if a message is encrypted with one type of key, it can only be decrypted with the other.
Bitcoin, used ECDSA. A cryptography based on elliptic curves to extract the public key after the private one. ECDSA contained two procedures composed of arithmetic operations, one for signing with the private key and the other for verification with the public key. Furthermore, this protocol was based on the secp256k1 standard. That is, once the private key was selected and multiplied by a base point on the elliptic curve, a new point (x, y) was obtained in the elliptic curve field, which was the value of the public key.
Taproot and Schnorr firms
Bitcoin crypto changed with the arrival of Taproot, the last Soft Fork that Bitcoin has ever had. This implementation was made with the intention of increasing the levels of security and privacy by changing the cryptography used. In other words, ECDSA was replaced by Schnorr firms, which have the advantage of being more secure, providing more privacy and allowing them to be more scalable.
The key concept of Schnorr signatures is that they allow multiple transaction signatures to be combined with the same input into a single signature. This method allows you to reduce the storage occupied within the block and increase the speed with which transactions are committed. In addition, for large multisig transactions the size of a block with a “Master Signature” is significantly reduced.
Schnorr signatures do not add greater anonymity to your individual Bitcoin address, but they do make simple transactions indistinguishable from complex ones. This allows greater privacy, validation speed, scalability and also allows more transactions to be added within a block.
Other ways to improve privacy
- Zero Knowledge Proof: It allows a “Verifier” to verify that certain information that is reaching it is correct without having to know its value, thus achieving maximum confidentiality. A commonly known example is the Yao Millionaire Problem, where 2 millionaires want to know if the other has the same amount of money as him, but without revealing the exact amount of each.
- CoinJoin: It is an anonymity strategy whereby transactions made by multiple senders are mixed with each other before reaching the recipients. This type of technique requires several parties to jointly sign a Smart Contract. Once signed, their coins are mixed in a new transaction leaving participants with the same number of coins but with mixed addresses.
- Stealth Addresses: the main objective is to hide public access to the parties involved in the transactions, thus allowing the issuer to generate new addresses associated with the original each time a transaction is carried out. In this way, it prevents different payments made to the same beneficiary from being associated.