Taproot addresses are the result of the Taproot upgrade to the Bitcoin network that arrived in 2021. In this guide, we’ll familiarize you with the details of what makes them unique, and what you can do with them.
What Is a Bitcoin Taproot Address?
Taproot addresses are a fairly new type of Bitcoin address, which arrived with the Taproot soft fork upgrade to the Bitcoin network in 2021. Taproot represents a significant upgrade that increased transaction efficiency and privacy upon implementation, and also introduced native smart contract capabilities to the Bitcoin network. These native smart contract capabilities are crucial for the creation of digital assets and the development of DeFi tools on the Bitcoin network.
A Taproot address allows users to take advantage of these benefits when transacting on the Bitcoin network.
How Does a Bitcoin Taproot Address Work?
Bitcoin Taproot addresses use the Pay-to-Taproot (P2TR) format, which leverages the technology introduced in the Taproot soft fork upgrade. All Taproot addresses begin with the characters ‘bc1p’ and may also be called Bech32m addresses.
The technology introduced in the Taproot upgrade allows for multiple scripts to be compiled into a single, consolidated script which greatly increases the transactional efficiency of the Bitcoin network by significantly reducing the data footprint of each individual transaction.
This is accomplished primarily via the use of Schnorr signatures, which allow single-signature transactions and multiple multisig transactions to be compressed into a single signature, and merkle trees, which allow for the embedding of complex scripts – a necessary tool for smart contract implementation – within transactions.
Benefits of Taproot Addresses
Greatly increase the efficiency of the Bitcoin network
Reduces transaction sizes and increases throughput during high-stress periods
Increases privacy and security via transaction and signature compression
Allows for native smart contract implementation
Allows for interaction with Bitcoin Ordinals
Allows for the creation of digital assets on the Bitcoin network
Introduces complex DeFi capabilities to the Bitcoin network
Taproot Addresses vs. Traditional Bitcoin Addresses
Taproot addresses
‘Bech32m’ format, all addresses begin with the characters ‘bc1p’
Single-signature, multisig, batched single-signature and multisig transactions are supported
Has native smart contract support
Fully compatible with legacy, SegWit, and Native SegWit
Less widespread than legacy, SegWit, and Native Segwit
Traditional Bitcoin addresses
Begin with the number ‘1’ or ‘3’ and is followed by a string of 26-35 alphanumeric characters
Only support single-signature transactions
No native smart contract support
Fully compatible with legacy, SegWit, and Native SegWit
Fully adopted, standard Bitcoin address format
What Can You Do With a Taproot Address?
In order to use a Taproot address, you must first have a Bitcoin wallet that supports the Taproot address format and protocol. That wallet will generate Bech32m addresses, which you can then use to receive Bitcoin payments.
A Taproot address will also allow you to interact with the more modern enhancements brought to the Bitcoin network by the Taproot upgrade. Taproot’s native smart contract capabilities paved the way for technologies like Ordinals, as well as the wider creation of digital assets like NFTs on the Bitcoin network.
Taproot’s smart contract capabilities have also allowed for the implementation of DeFi natively on the Bitcoin network, meaning that Taproot address holders can now participate in lending, staking, liquidity pools, and beyond, putting their bitcoin to work and helping build the future of finance.
Wallets Supporting Taproot Addresses
Since the Taproot upgrade is still a relatively recent change to the Bitcoin network, not all wallet providers currently support Taproot addresses, nor the technologies they’ve made possible.
Luckily, Leather is a fully Taproot-compatible wallet that makes it very easy to get your own Taproot address, allowing you to receive Bitcoin from both legacy and Taproot addresses.
With a Leather wallet, users can take advantage of Taproot’s capabilities to buy, send, and receive tokens and collectibles, as well as connect their wallet to various Web3 applications. Doing so allows you to mint your own NFTs, explore Bitcoin Ordinals inscriptions, and make use of Bitcoin DeFi platforms.
Taproot Adoption and Future Outlook
While Taproot is not yet fully adopted throughout the wider Bitcoin wallet ecosystem, it is possible to send Bitcoin to any legacy address via your Taproot wallet.
Conversely, Taproot is the latest step forward in Bitcoin’s journey to mass adoption, and is the only wallet type that grants users full, unfettered access to the newest and most exciting opportunities in the wider Bitcoin universe. Defi, native digital assets, and more require the use of Taproot’s BRC-20 smart contract capabilities, meaning that a legacy wallet – or even SegWit and Native SegWit wallets – simply won’t do.
As Bitcoin’s use cases continue to expand, and new users are drawn to an increasingly wide array of real-world implementations that Taproot helps bring to life, it seems impossible that legacy-only wallets will not catch up. If they don’t, they risk being left in the dust.