Investment Idea

“Taproots Schnorr” a gift and a welcome step forward for Bitcoin vs Ether

Mikael Syding
17/06/2021 | 3 min read

Thanks to a successful cryptocurrency campaign this weekend, it may now still be a good time to buy Bitcoin. Sure, the most knowledgeable have already understood the situation and traded up Bitcoin by a third, but it's a long way home.

In 2017, it was the introduction of Segregated Witness that brought both big headlines and a course rocket to the moon during the second half of the year. This was mainly due to the fact that “SegWit” was the last step in implementing the Lightning Network, ie the add-on that enabled lightning-fast Bitcoin transactions outside the infamous slow but secure main chain. Thus, Bitcoin responded to the critics who said that Bitcoin was too slow to ever become a currency in earnest. Some repeatedly make the mistake of believing that Bitcoin is as dead as Linkin Park, but apparently as smart as decisive steps are taken in the right direction at controlled intervals. The other day it was time again, and this time the Bitcoin developers responded to Ethereum's DeFi (Decentralized Finance) argument.

If the veteran Bitcoin is hard rock, and Ether with its fully programmable smart contracts is punk, then the latest iteration of Bitcoin that was voted through this weekend and introduced this fall is to be considered "now metal", ie the best of both worlds. Maybe that's why the Bitcoin upgrade with ether-like elements has the code name "Taproot". The latter was one of the foremost names in the now metal genre that mixed heavy metal with e.g. punk and hip hop. The ingenious Linkin Park was of course also an example of this.


Now it is no longer just an over-optimistic Blue Sky analysis to expect more elements of smart contracts, such as time-locks (predetermined deferred transactions), multi-signature solutions and other unintroduced innovations on Bitcoin's blockchain. Taproot enables these with as high a degree of anonymity and security as the Bitcoin community has become accustomed to and demands. If I have understood this correctly, it is the new signature variant "Schnorr" that maintains the anonymity of those involved in more complex transaction types than pure transfers. Lightning Network's fast transactions also benefit from Schnorr's ability to conceal the actual origin of the transactions and the parties involved. In addition, there will be less code to move the main chain. I'm pretty sure I understood the benefits themselves and Taproot's greatness, but if there are to be in-depth detailed questions on the interpretation of the new code, I invoke the fifth addendum (the right to remain silent) to avoid answering something really stupid. As the enhanced anonymity may also support illegal and criminal activities it may result in accelerated action by regulators and lawmakers to regulate cryptocurrencies – the outcome remains unpredictable.


As always, I am divided between Bitcoin and Ether and it usually ends with me buying both to about the same extent. Right now, however, Taproot can give Bitcoin an advantage for a while, not least considering how strong Ether has been so far this year. In the first half of the year, the ETH / BTC price rose more than 3x from 0.025 to 0.080. The Ether price was driven by several upgrades, such as the 1559 proposal that makes Ether less inflationary, and Ethereum 2.0 with a more environmentally friendly Proof Of Stake standard than Bitcoin's energy-saving but maximum-proof Proof Of Work, not to mention the huge publicity the DeFi concept has received.

Thus, it may be time for Bitcoin to lead the march upwards for a while for the cryptocurrencies, with somewhat the same argument that favored Ether during the first half of the year - ie technological development. You may buy one or buy both, let them shift different amounts at different times or invest passively equally in both and rebalance the weights to 50/50 at regular intervals. In any case, I think both Ether and Bitcoin have a long way to go (in any direction) before they lose pace. Whatever you decide, Vontobel has a variety of products in the cryptosphere, such as mini futures on BTC1 or their new Ether tracker, but since you're reading this, you already knew that.

In any case, fiat currencies such as the EUR and the USD are hardly developing at all, no matter what they say, perhaps soon talking about looking at an investigation of possible digital currencies at some point in the future. Meanwhile, both small and large companies have already bought Bitcoin, and this weekend even  a small country introduced Bitcoin as a legal currency. Now all authorities, banks and companies must accept Bitcoin as payment with the same status as El Salvador's second currency, USD. It would be poetically beautiful if the next to adopt Bitcoin as a legal currency becomes a large and economically failed country like Argentina.

@Mikael Syding

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