The Next BIG Thing in Bitcoin Network: Schnorr Signatures
Hi there!
With the activation of SegWit in the Bitcoin protocol, the developers can finally start to implement new updates into the BTC blockchain. One of them is Schnorr Signatures. It sounds like a very complicated thing but the basic idea is very simple and I will try to explain it in few paragraphs :)
What Are Signatures
In simple words - signatures are the mathematical proof that the Bitcoins you sent were indeed yours - that they are coming from your Bitcoin account and that you're not sending coins that belong to someone else.
In you think about Bitcoin transaction as a bank check - the signature is exactly the same thing in both cases. But in Bitcoin world signatures take precious storage space in the block - space that could be otherwise used to contain more transactions.
This is especially a problem when you're sending many checks - many transactions from different accounts (Bitcoin addresses) into a different, single account. Even though for the user this is a single transaction, it has to contain all signatures from all the user's Bitcoin addresses.
How Can Schnorr Signatures Help
Schnorr Signatures solve this problem so even if the user sends BTC from many BTC addresses that he owns - he needs only one signature in the BTC block. In other words all his checks are signed by one signature and this helps to save a lot of space that can be used to store more transactions.
This is best demonstrated by this illustrations:
According to the developers this reduces the storage and bandwidth usage by at least 25%.
Answer To The Spam
There's a case where Schnorr Signatures are extremely helpful - transactions Spam.
Without going into politics - many believe that Bitcoin miners spam the blockchain with many transactions in order to increase fees for normal users and to push their agenda for larger Bitcoin blocks.
This was especially visible during the New York agreement process - before this happened, the Bitcoin Network was highly congested with many unconfirmed transactions. According to miners, who signed the NYA, this was a proof that larger blocks are indeed necessary. Interestingly, after NYA was signed, the BTC network congestion drastically fell.
What a coincidence :)
And this is how the Spam looked like in the Bitcoin blockchain:
Many inputs, one output. This is a pretty neat definition of Spam, both the one to eat and in the Bitcoin world :)
Transaction like this needed many signatures and took a lot of space in Bitcoin block - and still this is only one transaction!
You can probably already figure out that this transaction, using Schnorr Signatures would require only one signature and would save a ton of space that can be used for other transactions.
At this moment we don't know exactly when Schnorr Signatures will be mass adopted but probably not in the very near future. First we need all the major Bitcoin wallets and exchanges to use SegWit - than we can do further upgrades. And Schnorr Signatures are not the only one!
Sources:
https://medium.com/@SDWouters/why-schnorr-signatures-will-help-solve-2-of-bitcoins-biggest-problems-today-9b7718e7861c
https://bitcoinmagazine.com/articles/the-power-of-schnorr-the-signature-algorithm-to-increase-bitcoin-s-scale-and-privacy-1460642496
It sounds realy great. But will it reduce the time to confirm a block because of the reduction in bandwith needed?
yes
Neatly explained, thanks
Nice post, I haven't heard about this before. Thanks for sharing!
It seems like a great concept, but I seriously doubt it will save 25% bandwidth. I don't think that that many users will send BTC from many wallets to one because there is almost no benefit to having only one wallet, more wallets help keeping your wealth and your transactions secret.
I also don't think it will help solve transaction spam, because it is still voluntary. Spamming for crypto-political reasons or just to increase tx-fees is still possible.
I hope you can prove me wrong on these points, because I always like to hear about new improvements to the Bitcoin system. :)
Yes I believe it is only for big companies, exchanges etc.. . But it might still be a big part of the global bandwidth..
Good explanation of a tricky subject, Cheers!
I never knew about this. It is not a 100% solution to the scaling issue but a prime example how a free market (helped by open source characteristics) finds solutions to problems encountered.
The road is long and hard, but progress is being made.
super
This post has received a 1.33 % upvote from @booster thanks to: @tipu.
Thanks a lot
https://steemit.com/cryptocurrency/@dobartim/best-investment-strategies-in-crypto-on-stock-exchange
Great, more terminology for me to try and remember lol. Thanks for the simplified explanation of this rather complex issue. Maybe at least now I'll have some idea when it comes up for discussion somewhere. The good news for me is that it looks like progress, and every step forward is good news for all of us.
Good job on visuals