What are Bitcoin payment pools?

Bitcoin payment pools may be one of the most ambitious ideas for cryptocurrency’s future. Here is what it is all about.Payment pools, a potential Layer Two solution made possible through Taproot, could let groups of bitcoin users share UTXOs for more privacy.In October, developers introduced a proposal into the Bitcoin Core client’s source code that includes Shnorr’s signatures and Taproot and Tapscript technologies. The timing of its activation remains open, but the solution, which many people are looking forward to, offers the potential to create new, often very curious scenarios. Taproot is the second part of the offer. While Snorr’s scheme offers a new type of signature, Taproot expands their functionality — a combination of cryptographic tricks allows users to hide details of their financial activity behind seemingly ordinary Bitcoin transactions.Moreover, Taproot technology has already become a source of inspiration for new ideas and developments that may become another part of Bitcoin in the future. Based on the basic idea of Taproot, Jeremy Rubin, Antoine Reard, Gleb Naumenko, Gregory Maxwell and other Bitcoin Core developers have started discussing the concept of payment pools. Such pools (JoinPool, CoinPool) could allow a group of users to act as joint owners of the same coins (transaction outputs) and make payments between them.Since the group itself and its individual members are hidden in the Taproot structure, a higher level of privacy and flexibility of smart contracts is achieved, and other benefits also appear. These include the potential to send and receive transactions off-chain, i.e. without recording data in the blockchain. This turns payment pools into a new second layer of Bitcoin. The design features of the payment pools differ depending on the offers, but they all share a common idea.To create a payment pool, users combine their coins on the Taproot address. For example,…