Whilst much of Bitcoin’s development has recently been focused on the Lightning Network, there is another development that has been gaining interest. Schnorr Signatures will help to increase privacy on the Bitcoin network whilst also helping with issues of scalability.
What are Schnorr Signatures?
Schnorr Signatures are not a new invention. They were first created by German professor and cryptographer Claus-Peter Schnorr in the 1980s. The work built upon other famous cryptographers at the time including David Chaum. Interestingly though, Schnorr chose to patent his new invention, much to the chagrin of other cryptographers. This patent expired in 2008, just as the Bitcoin network was about to go live.
Blockstream co-founder and Bitcoin developer Pieter Wuille submitted the Bitcoin improvement protocol (BIP) featuring Schnorr Signatures after many years of discussion about the possibility of adding them to Bitcoin. The implementation of SegWit has now allowed for Schnorr Signatures to be added to Bitcoin.
Much of cryptography is extremely complex to the untrained eye, and Schnorr Signatures are no different. For a more technical understanding of how they work, both Jimmy Song and Andreas Antonopoulos have provided these brief videos to explain the technology in more simple terms.
Why are they important?
Speaking to Vortex, who Coin Rivet interviewed earlier in the year, he describes Schnorr Signatures as very important because “Schnorr (and Taproot) is extremely powerful for the privacy in Bitcoin because we can make complex multi-sig transactions and even complex coinjoin transactions look like everyday normal transactions. This makes it difficult for chain analysis companies to analyse the inbound/outbound flows of coins in said transactions.”
When asked whether advances such as Schnorr pose a threat to the future of chain analysis companies, Vortex told us: “It’s always a cat and mouse game, with both sides zigging and zagging. However, this does represent a significant step towards achieving more privacy. We’ll likely never see chain analysis companies go away completely until we get rid of the need for KYC/AML.”
The cat and mouse game Vortex speaks of is one that has rumbled on throughout the history of cryptography. As academics and cryptographers alike come up with new techniques, there is usually a considerable pushback from either the state or businesses. Phil Zimmerman, creator of Pretty Good Privacy, found himself on the wrong side of the US government with his creation.
For the crypto-anarchists, privacy is a key tenant. As Bitcoin has become more popular, we have seen the rise of chain analysis companies, which allow people to understand who is sending what and where. This coupled with KYC procedures on exchanges means that most Bitcoin transactions are now traceable.
Upgrades such as Schnorr attempt to reverse this trend and bring privacy back to the forefront of Bitcoin. How the regulators will react to such developments remains to be seen, however.
Other cryptocurrencies are also very much focused on privacy. Monero and Zcash are two of the biggest privacy-based cryptocurrencies. Monero uses a technology known as Bulletproofs whilst Zcash uses ZK-Snarks. Digibyte also recently announced it will be implementing an upgrade known as Dandelion to improve its privacy as well.
When will Schnorr Signatures be implemented?
Like many previous upgrades to the Bitcoin network, implementation is taking a frustratingly long time. However, there are very important reasons for this. We have seen with other cryptocurrencies how botched and rushed code can have disastrous effects. Therefore, each Bitcoin upgrade is extensively tested and peer reviewed to ensure that there are no issues when it is finally implemented on the network.
Before Schnorr Signatures can be fully implemented on the Bitcoin network, the technology will need to have the consensus of the community. The last time there was an upgrade like Schnorr Signatures was the introduction of Segregated Witness (SegWit). This led to the scaling wars that ultimately forked Bitcoin into two blockchains. Ironically though, both Bitcoin and Bitcoin Cash aim to implement Schnorr Signatures into their networks, which suggests that gaining consensus on either blockchain won’t be as difficult this time around.
Whilst complex, Schnorr Signatures are a fascinating upgrade to Bitcoin that will help preserve the privacy of Bitcoin’s users. Although the implementation process is a long one (like most upgrades to Bitcoin), it seems unlikely that Schnorr will suffer the consensus issues that plagued the SegWit upgrade.
Many people solely focus on the price of Bitcoin when this is in fact one of the least important factors. When people are sad in the bear market, developers continue to code and improve Bitcoin from the base up.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.