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Bitcoin [BTC]’s new Improvement Proposal: What exactly are Schnorr signatures?

Anirudh VK

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Bitcoin [BTC]'s new Improvement Proposal: What exactly are Schnorr signatures?
Source: Unsplash

Signatures are one of the cornerstones of the Bitcoin [BTC] blockchain. They are what allow for the solution to the problem of double spending on the blockchain, albeit in an indirect way.

Signatures on the blockchain are what allow transactions to be verified. Once a user creates a hash of their transaction data, the hash for that transaction can be signed using their private key. This signature can be verified using anyone who knows the transacting parties’ public key.

However, the current signature system, known as Elliptical Curve Digital Signature Algorithm [ECDSA] is said to fall short when compared to a ‘superior’ signing method – Schnorr signatures.

A Schnorr signature, as the name implies, is a sign generated by a Schnorr signature algorithm. Its security is based on the intractability of discrete algorithms. To be used on the Bitcoin network, a Bitcoin Improvement Proposal has been submitted. This proposes a standard for 64-byte Schnorr signatures over an elliptic curve.

The security of the Schnorr signature is provable in the Random Oracle model, whereas ECDSA does not hold any similar proof. The ECDSA is also malleable, as a third party can alter valid signatures for a given public key.

Moreover, Schnorr signatures are said to reduce storage and bandwidth use by 25%, as they have the capacity to execute Multisig. Using a program such as MuSig, it is possible to produce combined public keys signed for by multiple participants. This improves privacy and efficiency and allows for the use of CHECKMULTISIG for batching of transactions.

Use of the standardized Schnorr signature will also result in spam attacks as seen on the Bitcoin blockchain during the blocksize debate. Since multiple addresses sent coins to the same address in that kind of attack, Schnorr signatures work in such a way that multiple addresses sending coins to the same address are batched with a single signature.

Overall, the Schnorr signature standard seems to be the way forward for the Bitcoin blockchain. Certain applications of this improvement also allow for atomic swaps, through blind signings.





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Anirudh VK is a full-time journalist at AMBCrypto. He has a passion for writing and interest towards the future of blockchain technology and cryptocurrencies. He does not own any cryptocurrencies currently.

Bitcoin

Bitcoin will likely be valued at $100,000 with a market cap of over $2 trillion before the end of 2021

Priya

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Bitcoin [BTC] will likely reach $100,000 with a market cap of over $2 trillion before the end of 2021
Source: Unsplash

The entire cryptocurrency market seems to be on the brighter side of the market since the beginning of the year. A majority of the coins have recorded significant recoveries from their 2018 slump, a period during which most coins lost over 90 percent of their value, when compared to their all-time highs. Among all the coins in the market, Bitcoin [BTC] aka the digital gold, was noted to be making a massive comeback as the coin breached the $11,000 mark after nearly 15 months. The coin however, soon retracted to settle below the $11,000 level.

According to CoinMarketCap, at press time, Bitcoin was trading at $10,887.27 with a market cap of $93.549 billion. The coin recorded a 24-hour trading volume of $20.757 billion for the past 24 hours and saw a massive rise of over 17 percent over the past seven days.

Anthony Pompliano, Co-founder of Morgan Creek Digital Assets, predicted that the largest digital currency could rise to reach $100,000, before the end of 2021. Pomp added that he was around 70-75 percent confident in this prediction. He stated,

“As I have previously said, making predictions is difficult […] Part of my process as a professional money manager is forming a thesis (price target), identifying a timeline (date), and establishing a confidence level. And then constantly re-evaluating those three aspects of my thought process as I receive new information.”

Pomp however, listed six pointers that have to be understood beforehand. First, this prediction is not an investment advice, and people should do their own research before investing in the digital currency. The second is with respect to Bitcoin’s volatility, with Pomp remarking that since it was a highly volatile market, the coin could witness a significant fall before being valued at $100,000. He stated,

“I anticipate that there will be numerous 20-30% drawdowns from new all-time highs as the asset continues to appreciate in value. These mini-boom/bust cycles should not cause panic, but rather need to be understood as natural market dynamics whenever an asset gains significant value in short periods of time.”

Further, the partner of the investment firm stated that the rise would be driven by several catalysts. This includes institutional adoption, exchange-traded funds and retail product approvals, global instability, governments all across the globe manipulating currencies, markets and economy. He went on to state,

“The market cap of Bitcoin will reach $2+ trillion when Bitcoin is worth $100,000. This is less than 1/3 the market cap of gold and less than 1/40 the global money supply.”





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