BTC to Receive Upgrades
This morning we saw BTC climb above $40k USD. A variety of factors are at play, but one reason may be that Bitcoin has confirmed its first upgrade in four years.
Bitcoin miners—those who secure the bitcoin network and validate transactions in return for bitcoin tokens—approved the long-awaited upgrade, known as taproot, which is due to take effect in November.
Taproot, the most anticipated upgrade to the bitcoin protocol since segregated witness (SegWit) in 2017, is expected to improve bitcoin's privacy and efficiency via a new signature scheme known as Schnorr that will replace bitcoin’s current elliptic curve digital signature algorithm (ECDSA).
Taproot is a very important upgrade that allows new levels of development previously impossible on bitcoin's blockchain and further support bitcoin's position as the dominant cryptocurrency. The potential impact is probably not yet fully understood by the wider community, but this is likely to become clearer over time.
Taproot adds important new functionality to the bitcoin protocol. But perhaps more important is that its adoption was nearly unanimous. In the wake of the block size war of 2017, the smooth taproot upgrade is a demonstration of strong consensus about the direction of base layer protocol development.
The required threshold for taproot support was crossed by bitcoin miners over the weekend, locking in the "landmark" upgrade that signals the bitcoin network can evolve peacefully.
Additionally, the gains over the last few days may be due to a shift in sentiment – particularly from the latest Elon Musk tweet about BTC:
"When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing bitcoin transactions," Musk posted to Twitter.
Musk also clarified that Tesla has only sold 10% of its BTC holdings after being accused of pumping and dumping the cryptocurrency. Moreover it did so to ‘test liquidity’ for when it may actually want to need to sell a large amount. Clearly it passed.
Estimates for what percentage of renewable energy is currently powering the bitcoin network are inconsistent. A recent report estimated renewably generated electricity made up almost 40% of the energy consumed by the bitcoin network, however, a previous study put the figure at just over 70%, largely due to the abundance of hydroelectric generators in Southwest China and Scandinavia—both major bitcoin mining hubs.
As for where we stand in BTC's price cycle, many experts believe that the latest pullback is one of the trademark retracements before the crypto winds up and continues its bull trend in full force. After suffering a 55% pullback from the recent high to low, and with the BTC Fear Index reaching all times low, it's not hard to believe that we have seen the bottom. Time will tell… we may not be waiting long if history tells us anything.