Stablecoins can now be issued on the Bitcoin network
Stablecoins can now be issued on the Bitcoin network
Bitcoin

Stablecoins can now be issued on the Bitcoin network

By Vincenzo Cacioppoli - 29 Sep 2022

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Wednesday saw important news regarding the Lightning Network, the second-layer network that should make Bitcoin effectively scalable, a new version of Taro, a new software that will allow Bitcoin developers to create, send and receive stablecoins on Bitcoin’s blockchain.

New Taro protocol makes it possible to issue stablecoins on the Bitcoin blockchain

Lightning Labs on Wednesday released the first version of the open source Taro software to enable the minting, sending and receiving of resources on the Bitcoin blockchain.

Taro is a protocol based on Taproot, an update to the blockchain network introduced in April that allows those who own Bitcoin or transact with it to issue assets as stablecoins on the same blockchain as Bitcoin. These assets can then be transferred to the Lightning network for instant, high-volume, low-fee transactions.

According to Lightning Labs developers, the Taro software will now allow the creation of peer-to-peer Bitcoin and native Lightning stablecoins that settle instantly, with low transaction fees and no financial intermediaries.

“With Taro and the incredible developer community, we can build a world where users have US dollar-denominated balances and BTC-denominated balances (or other assets) in the same wallet, trivially sending value through the Lightning network just as they do today,” 

Lightning Labs wrote in its announcement Wednesday.

The new alpha version of Taro should allow developers to issue stablecoins on the testnet, an alternative Bitcoin blockchain to the official one made specifically for public testing. It allows developers to test applications with testnet digital assets, instead of using actual BTC coins with the significant advantage of not exposing the main Bitcoin blockchain network to any risk. Projects developed in this manner are then published on the main network, only on completion of extensive testing and bug fixes.

Lightning Labs’ technological developments

Last April at the launch of the new Taproot update, Elizabeth Stark, co-founder and CEO of Lightning Labs, had announced the upcoming release of Taro with the possibility of bringing assets, such as precisely stablecoins, onto the Bitcoin blockchain.

Also during that public conference, the CEO had announced that she had raised $70 million in Series B funding, led by Valor Equity Partners and joined by global asset manager Baillie Gifford. 

Stark then also wanted to address the innovative possibilities that the new software offered to developers and users of the blockchain network. Stark had announced that this version offered efficiency, privacy and flexibility improvements to Bitcoin.

Ryan Gentry, director of business development at Lightning Labs, said in a recent interview that the protocol is:

“uniquely enabled by Taproot to incorporate spending conditions into MASTs without revealing all the details to the blockchain. Using MASTs, Taro embeds the data for new resources in such a way that these resources can all be treated as Bitcoin.”

Taro’s security would be based, as Gentry explained again, on embedded consent, meaning that every transaction made on Taro includes Bitcoin data within it that must then be verified on Bitcoin’s main blockchain network:

“There are additional rules to govern that data as defined by the Taro protocol, similar to how LN is an overlay network that uses Bitcoin smart contracts but has its own set of rules to enable instant Bitcoin transfer.” 

The company seems to be putting a lot of focus on this new upgrade, as explained by CEO Stark, and the $70 million funding round raised in April was aimed primarily toward this new development:

“The goal of the announcement was to focus on the [Taro] technology; raising funds is just the means, not the end.

The funds will be used to strengthen Lightning Lab’s runway flexibility and serve as fuel to grow the company.”

The future of the Bitcoin network according to Lightning Labs

On the website of the company, which is still relatively small at around 24 employees, but growing continuously and steadily, the release of the new Taro update is greeted with a lengthy post in a very enthusiastic tone, considering the fact that this is considered one of the major innovations of the Lightning network.

The corporate post reads:

“Today we’re excited to announce the alpha release of the Taro daemon, enabling developers to mint, send, and receive assets on the bitcoin blockchain. In April, we first announced Taro, a Taproot-powered protocol for issuing assets that can be transferred over bitcoin and in the future, the Lightning Network for instant, high volume, low fee transactions. We are grateful to the bitcoin developer community for their valuable feedback, and have incorporated it into the draft Bitcoin Improvement Proposals (BIPs), which specify the protocol, and the Taro alpha daemon implementation.”

According to the lengthy statement from Lightning labs, the innovation is considered so important because it would represent the first step toward the “bitcoinization of the dollar,” both because it allows assets, such as stablecoins, to be issued on the more decentralized and secure blockchain, and because it allows users to trade those assets on the best performing and most efficient global payments network, Lightning:

“In talking to bitcoin and Lightning developers across the world, we’ve heard that users want to use stablecoins in the same way they’re using bitcoin on the Lightning Network: instantly settled, low-fee, peer-to-peer transactions without financial intermediaries. Taro will enable applications around the world like Strike, Ibex Mercado, Paxful, Breez, and Bitnob to give their users access to bitcoin- and Lightning-native stablecoins.”

Vincenzo Cacioppoli

Vincenzo was born in Genova but lived most of his life in Milan. He has a degree in political science. He is a journalist, blogger, writer, and marketing and digital advertising expert. After a long experience in traditional marketing, he started working with the web and digital advertising in 2011, creating a company called Le enfants. Passionate about the web and innovation, in 2018 he started exploring the topics related to blockchain technology and cryptocurrencies. Independent cryptocurrency trader since March 2018, he now collaborates with companies in the sector as a content marketing specialist. In his blog. mediateccando.blogspot.com, he has long been primarily focused on blockchain, which he considers to be the greatest technological innovation after the Internet. His first book about blockchain and fintech is scheduled for release in November.

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