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Scalability has long been considered one of the biggest obstacles in the continued growth of Bitcoin. In order to accommodate the millions of users trading in bitcoin, the network must be scaled. There are numerous scaling solutions being developed to “speed up” Bitcoin. While layer 2 solutions have been attracting attention in the blockchain community, base-layer solutions are not to be neglected as they, too, can increase the network’s throughput substantially. Among these layer 1 solutions are Schnorr signatures. This article explores their operation and lays out the benefits of the technology.
What are Schnorr Signatures?

Schnorr signature essentials

  • Schnorr signatures are digital signatures produced by the Schnorr signature algorithm.
  • They aggregate multiple signatures into one when a transaction has more than one originating address.
  • Thus, they take up less space and, consequently, provide layer 1 scaling by increasing the number of transactions each block can take.
  • Schnorr signatures also provide an increased security against spam attacks.

The basics of Schnorr signatures

The Schnorr signature algorithm has been designed by the German cryptographer Claus Schnorr, years before Bitcoin even saw the light of day. In search of scaling solutions, Bitcoin developers have recognised the potential of this algorithm to provide a means of scaling for the popular cryptocurrency by reducing the requirement for transaction signatures with certain types of transactions.

A BTC transaction cannot take place without a signature, which takes up a certain amount of space on the blockchain. This is not a problem in instances where BTC is sent from one address to another. However, it becomes more of an issue when multiple addresses are used to send BTC to a single address.

Each of the sending addresses will have to provide a signature in order for the transaction to be successful. Imagine you had five BTC addresses and you sent 1 BTC from each of those addresses to your friend’s address. You would have to provide five signatures which would take up five times as much block space and, consequently, require a higher fee. This issue can be solved with Schnorr signatures.

A Schnorr signature is a digital signature produced by the Schnorr signature algorithm. It enables a transaction to be signed with a single signature, regardless of how many addresses the funds are being sent from. Schnorr signatures are one of the first types of digital signatures the security of which is based on the intractability of discrete logarithm problems.

Another advantage of Schnorr signatures is increased privacy in terms of securing your bitcoins. Some users use multiple signatures to send transactions as a way of increasing security. For example, you could require multiple people or devices to sign a transaction – a feature referred to as MultiSig. Someone might not want others to see that they are doing this, Schnorr signatures make such signatures look like any other.

Benefits of Schnorr signatures

The most notable benefit of Schnorr signatures is their contribution in terms of first-layer scaling (scaling of the blockchain itself, rather than relying on external, layer 2 solutions). By reducing the amount of signature data stored on the blockchain, Schnorr signatures free up block storage space. This allows for a higher number of transactions per block, which increases the transaction throughput of the Bitcoin network.

But scaling is not the only way Schnorr signatures can improve the Bitcoin protocol. Another major improvement that they bring is increased security against spam attacks. Spam attacks are intentional attacks on the network that cause spikes in transaction traffic. They trigger a bottleneck effect, causing delays in the confirmation of transactions from the mempool. As a result, transaction fees also rise.

The development of Schnorr signature technology was unlocked by the SegWit protocol. SegWit dealt with a bug in the Bitcoin protocol commonly known as transaction malleability, which had made it possible to modify transaction hashes and, consequently, IDs. While not the project’s initial objective, SegWit turned out to be a significant step in the scaling debate that had puzzled the Bitcoin community for years.

Bitcoin’s popularity led to the need for scaling. Coupled with the fact that BTC is the first cryptocurrency to have been released to the public, its long-standing status as the cryptocurrency with the largest market cap and the consistency of technical improvements, among which Schnorr signatures are very important, make BTC the most prominent of cryptocurrencies, and often the first cryptocurrency that a user buys with ordinary money.

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