Schnorr Signature Meaning

What Is Schnorr Signature?

Most of the upgrades on the Bitcoin network aim to improve its efficiency rather than its functionality. Thus, Bitcoin has remained unaltered for most parts since its inception, unlike other blockchains. 

So far, the network uses the Elliptic Curve Digital Signature Algorithm (ECDSA). The Taproot upgrade, implemented in 2021, introduced three major improvements, including a second type of digital signature scheme, called the Schnorr signature (BIP340 or BIP-Schnorr). 

In cryptography, a Schnorr signature is a digital signature that combines multiple keys inside one complex transaction to generate a single unique key. This facilitates using one signature to authorize several transactions instead of signing each. This improves both transaction anonymity, and the transaction per second (TPS) per block by reducing the data load. 

So why was it not used in Bitcoin in the first place?

Well, it was patented by its creator, Claus P. Schnorr, which restricted its use. The patent expired in 2008 but the signatures still lacked adequate testing. So Satoshi Nakamoto used ECDSA, which was open source, well-tested, and quite popular by then, to implement Bitcoin. The Taproot upgrade introduced Schnorr signatures to the network in a soft fork, which enables the nodes to still use ECDSA.

Why is this Feature Important? 

Bitcoin uses multisignatures (multisig), where several signatures are required to sign a single transaction, to increase the security of the transaction. However, others can still track your transactions. Schnorr signatures improve Bitcoin’s privacy by ensuring that all transactions appear as single-signature transactions. It also obscures whether the BTC transaction used multisig or timelock.

Another significant advantage is key and signature aggregation, where signatures or public keys of multiple devices or users are combined into a “master signature” or master key. The master key is valid for the aggregate public keys and retains the length of one signer’s signature. This aggregation significantly saves space and computation resources since nodes have to verify only a single signature (“master signature”) to confirm a transaction’s validity.

Eliminating the need for multiple signatures or public keys to authorize a transaction optimizes computation and storage resources on the Bitcoin network. This increases the number of transactions per block, improving the overall transaction throughput on the network.

Furthermore, key aggregation also enables batch verification. Usually, nodes use a time-consuming process of verifying each signature and transaction in the new block it receives, one by one. BIP-Schnorr allows the nodes to confirm the transactions in batches. In return, computation power and time are significantly reduced in Bitcoin transactions.