Although Taproot took some time to gain momentum, its use cases have continued to grow since integrating Bitcoin-based Ordinal inscriptions and its November 2021 implementation with Bitcoin.

This article will delve deeper into the use cases for Taproot, focusing on Ordinal inscriptions and stablecoins built on Bitcoin, to better understand the innovative new features it brings to the table.

Bitcoin-Based Ordinal Inscriptions

Ordinal inscriptions present a groundbreaking development in Bitcoin, enabled by integrating the Taproot upgrade. In essence, Ordinal inscriptions involve attributing a unique ordinal number to each satoshi within the Bitcoin network. This numbering scheme, conceived by software engineer Casey Rodarmor, allows for precise tracking and verification of individual satoshis. It’s essential to grasp the concept of cryptographic signatures to understand the significance of ordinal inscriptions.

Cryptographic signatures form the bedrock of security within the Bitcoin network. When a user initiates a Bitcoin transaction, they must verify ownership of the coins through a digital signature. Traditionally, Bitcoin employed the Elliptic Curve Digital Signature Algorithm (ECDSA). However, the introduction of BIP 340, a component of the Taproot upgrade, unlocked Schnorr Signatures—a more secure alternative.

Schnorr Signatures bolster theoretical security in Bitcoin transactions and facilitate key and signature aggregation. That enables more efficient and private multi-signature setups. In a multisig scenario, where multiple parties must sign a transaction, Taproot allows for the trustless combination of public keys into a single key. This innovation enhances privacy and boosts efficiency, as Schnorr signatures are approximately 10% more efficient than their ECDSA counterparts.

How Taproot Enables Ordinal Inscriptions

The seamless integration of the Ordinals protocol with the Taproot upgrade has been pivotal for Bitcoin’s evolution. The Taproot upgrade, composed of BIPs 340, 341, and 342, introduced significant enhancements to Bitcoin’s functionality.

Integrating Ordinals Protocol and Taproot Upgrade

Taproot’s incorporation of Merkelized Trees and Pay-to-Taproot (P2TR) protocols laid th