Scalability has always been one of the roadblocks in the evolution of Bitcoin. To meet the needs of the millions of users who transact through this cryptocurrency, optimizing the network is critical.
Many strategies are being explored to enhance Bitcoin. While layer 2 solutions are emerging and receiving increasing attention in the blockchain community, it is equally important to focus on base-layer solutions, which have the potential to significantly expand the operational capacity of the network. One of the most promising innovations in layer 1 are Schnorr signatures.
In the next few lines, we will elaborate on their functions and advantages.
Layer 1 and Layer 2
Layer 2 solutions are protocols built on top of an existing blockchain (the Layer 1) to improve its capabilities without changing the blockchain itself. These solutions aim to reduce congestion and costs while allowing more transactions. They are particularly useful for blockchains such as Bitcoin and Ethereum, which have faced scalability issues due to the increasing number of users and transactions.
Here are 3 examples of popular Layer 2 solutions and how they work:
Lightning Network(for Bitcoin): an off-chain network that allows near-instantaneous transactions between parties. Transactions are executed off-chain and only the final transactions are recorded on the main blockchain. This allows a large number of transactions at low cost.
Plasma (for Ethereum): a solution that allows the creation of daughter blockchains linked to the main Ethereum blockchain. Transactions are handled on these secondary blockchains and only essential information is then recorded on the main blockchain.
Rollups (for Ethereum): a technique that aggregates multiple transactions into a single transaction, reducing the use of space on the main blockchain. There are two main types of Rollups: zk-Rollups and Optimistic Rollups. Both use different techniques to aggregate transactions, but the goal is the same: to improve scalability.
The main advantage of Layer 2 solutions is that they offer greater scalability without requiring major changes to the underlying blockchain. However, like all technologies, they also present challenges and tradeoffs, such as the need to trust third-party entities in some scenarios or additional complexity in transaction management.
What are Schnorr signatures?
Schnorr signaturesare digital signatures produced by the Schnorr signing algorithm.
They can aggregate multiple signatures into one when a transaction has more than one source address.
As a result, they take up less space and increase the scalability of layer 1 by increasing the number of transactions per block.
Schnorr signatures also offer increased security against spam attacks.
The fundamentals of Schnorr signatures
This signature algorithm was devised by German cryptographer Claus Schnorr, years before Bitcoin was born. Looking for scalability solutions, Bitcoin developers recognized the potential of this algorithm to reduce the space needed for signatures in transactions.
A BTC transaction cannot take place without a signature, which takes up some space on the blockchain. This becomes a problem when multiple addresses are used to send BTC to a single address. Schnorr signatures allow a transaction to be signed with a single signature, regardless of the number of sender addresses.
An additional benefit of Schnorr signatures is increased privacy. Some users use multiple signatures as a way to increase security. Schnorr signatures make these signatures indistinguishable from other signatures.
The benefits of Schnorr signatures
The most notable benefit of Schnorr signatures is their contribution to top-level scalability. By reducing signature data on the blockchain, they free up space, allowing more transactions per block and increasing the capacity of the Bitcoin network.
But scalability is not the only improvement: they also offer greater security against spam attacks, which cause delays in transaction confirmations while also increasing fees.
The implementation of Schnorr signature technology was made possible by the SegWit protocol, which fixed a bug known as transaction malleability. Although it was not the initial goal, SegWit has become a key step in the scalability debate.
Conclusions
In conclusion, Bitcoin’s popularity and need for scalability, along with its prominent position in the cryptocurrency market and constant technical innovations such as Schnorr signatures, make BTC the cryptocurrency of choice and often the first choice for those entering the crypto world.