In mid-January, the Bitcoin Core developers released a document describing the benefits of using the Schnorr multi-signature technology. This technology should solve Bitcoin's blockchain scaling problem, improve the privacy of the system, and also prevent spam attacks to a higher degree.

Schnorr Multi-Signatures Work Principle

All transactions on the blockchain are accompanied by digital signatures, which allow proving rights of ownership. At the moment, the algorithm with a public key for the ECDSA (Elliptic Curve Digital Signature Algorithm) digital signature is used in the Bitcoin blockchain. Within the framework of this algorithm, a digital signature is used to operate two interconnected keys, the private and the public. The public key identifies the recipient and the sender, while the private key is used in conjunction with the public key to create an unsolicited signature for the transaction and is kept secret. A new digital signature is used for each transaction that takes up a lot of space on the blockchain. As a result, not only the requirements for transaction size increase but also the transaction fees for it.

The Schnorr multi-signature technology offers a fairly simple and elegant solution of systematizing digital signatures and combining keys. According to Pieter Wuille, one of the leading technology developers, this scheme is a combination of a signature and verification algorithm, where several signers, each with their own public and private keys, sign one message. As a result, instead of the existing scheme for generating individual signatures for each new transaction, signatories can use only one. This single signature can be verified by anyone who also knows the message and the public keys of the signers.

Thus, the developers plan to save space used on the blockchain. That, in turn, will solve the problem of low network bandwidth and high transaction fees. According to the developers, the Schnorr scheme will enable the network bandwidth to increase by 25% to 30%, and the data size in the blockchain will be reduced by a quarter.

Team and Tech

Bitcoin Core developers Gregory Maxwell, Andrew Poelstra, Yannick Seurin, and Pieter Wuille are working on the implementation of the Schnorr multi-signature technology, a process which has been ongoing since 2012.

Despite the obvious advantages of the technology, earlier implementation was impossible for two reasons. Firstly, there were too few developers in crypto communications that would understand Bitcoin's blockchain and cryptography well enough to ensure large-scale implementation of the Schnorr scheme. Secondly, this technology implies serious changes in the operation of the $100 billion Bitcoin network, which requires expert evaluation and preliminary testing of the technology.

The Segregated Witness (SegWit) protocol that was activated last year also helped implement the new Schnorr authentication scheme in the form of a backward compatible soft fork, rather than a hard one, as previously thought. Moreover, the SegWit protocol allows the technology to increase the level of privacy in some transactions and also helps in the fight against spam.

Yannick Seurin, the cryptographer of the French agency for crypto security ANSSI, and concurrently one of the leading developers of cryptography in the Schnorr scheme, noted in an interview with CoinDesk:

"Schnorr signatures and the applications they enable generate high hopes. As evidenced by the recent scaling debate, any efficiency improvement is highly beneficial to bitcoin."

Development of the Bitcoin Blockchain

The Schnorr technology is one of the many possible directions for the current development of Bitcoin's blockchain. In addition to SegWit, which had been activated last year, the Lightning Network was launched this year as a superstructure for the blockchain, which will allow users to conduct an unlimited number of micropayments that will not be recorded in the blockchain. Information about intermediate payments is not recorded, only the final balance is.

Nevertheless, given that a multibillion-dollar network is at stake, the renewal of which could disrupt the ecosystem, it will take a lot of effort to convince the majority of stakeholders to take the plunge. One of the contributors to Bitcoin Core, Nicolas Dorier, suggested that it might take several years to fully implement the Schnorr technology. This was reported by one of the leading developers of the technology, Pieter Wuille, during a presentation:

"Of course, I want to see the results of our work on the Bitcoin network, but this process takes a long time."