Building on the base established by Bitcoin’s latest protocol update, “Taproot”, Lightning Labs has announced a new protocol, “Taro”, to widen the range of assets supported by Bitcoin’s layer two protocol, the Lightning Network:
‘Bitcoinising the Dollar’
Taro is an open protocol made possible by Taproot that allows developers to issue assets on the Bitcoin blockchain and then move them onto the Lightning Network for speed and scalability, making use of bitcoin liquidity to ensure interoperability between assets.
We see Taro as an important step in bitcoinising the dollar, getting the best of both worlds by: 1) issuing assets like stablecoins on the most decentralised and secure blockchain, bitcoin; and 2) allowing users to transact on the fastest global payments network with the lowest fees, Lightning.
Ryan Gentry, director of business development, Lightning Labs
In practical terms, this means that digital assets such as stablecoins or even NFTs could be issued using a taproot script on-chain and then transferred either on-chain or via the Lightning Network.
By leveraging the Lightning Network’s one million-plus transactions per second capacity, digital assets could, pursuant to Taro, be settled faster and cheaper relative to all other blockchains:
The response from Bitcoiners proved to be enormously positive, with Marty Bent commenting: “If it [Taro] passes the peer review test – can bring the usecase of issuing and transferring digital assets that aren’t bitcoin UTXOs to the LNP/BP stack. If Taro is able to do this, it renders all of the competing altcoin narratives obsolete overnight.”
Lightning Growth Continues
As reported by Crypto News Australia, between August and September last year Lightning Network growth more than doubled. In fact, over the past 12 months it has experienced strong growth from both a US dollar (blue line) and bitcoin (orange line) perspective:
As Lightning Labs drives to solve real problems for real people, part of the uptick in network activity has been attributed to the growth of bitcoin as a remittances and payment technology, particularly among developing nations.
As business development director Gentry concludes about the Taro protocol:
Bringing stablecoins to bitcoin via the Lightning Network is good for users who want access to financial services, good for app developers who want new tools, good for routing node operators who want more fees, and good for issuers who want a better experience for their users.
Ryan Gentry, director of business development, Lightning Labs
Price action aside, it’s difficult not to be bullish on Bitcoin with developments such as Taro that appear set to catapult Lightning adoption.