Stablecoin on Lightning Network could pave the way for new use cases: how far along is the development of asset issuance protocols on Bitcoin?
During the Tuscany Lightning Summit in Viareggio, the state of the art of solutions enabling the integration of other assets onto Bitcoin, particularly on the Lightning Network, was discussed.
The two main protocols enabling this are Lightning Labs’ Taproot Assets and RGB, led by Maxim Orlovsky with the LNP/BP Association and Bitfinex, among others.
The RGB project was launched in 2016 by Giacomo Zucco. It is a protocol with a client-side validation design, involving the exchange of proofs of token ownership off-chain and utilizing the blockchain solely to prevent double spending issues.
The RGB model dictates that smart contracts are executed only on the client side: essentially, each wallet runs only the smart contract code of interest, validating only what the user deems necessary for themselves. Such a model allows for greater scalability, privacy, and network upgrade ease.
Taproot Assets, launched by Lightning Labs in 2022 during the Bitcoin Conference in Miami under the name Taro, is a project very similar to RGB. It also employs a client-side validation model for exchanging proofs of token ownership. With the project launch, Lightning Labs managed to raise $70 million for its development.
With Taproot Assets, each token is represented by a Taproot Bitcoin UTXO. The protocol leverages the privacy and scalability offered by the Taproot soft fork.
To issue one or more assets on Bitcoin using Taproot Assets, it is sufficient to execute a single Taproot transaction on the Bitcoin blockchain.
Multi-Asset Lightning with Taproot Assets
In his speech titled “Multi-Asset Lightning with Taproot Assets,” Ryan Gentry of Lightning Labs explained the reasons behind the idea of making LN a multi-asset protocol.
Despite its growth in recent years, the volume of bitcoin trading on LN is still low. According to Gentry, to increase the volume and value of the Lightning network, there is a need for a medium of exchange that people are accustomed to trading: the US dollar.
Today, Lightning Labs’ main goal is to attract the stablecoin market and bring new users to LN.
Gentry then outlined the new opportunities introduced by Taproot Assets. Among the various possibilities:
- merchants can sell goods and services for US dollars;
- wallet providers can onboard users who wish to use dollars.
Trading RGB assets
During the panel “Trading RGB assets,” Maxim Orlovsky intervened to showcase the developments of the RGB protocol.
Orlovsky presented version 0.11 of the protocol, which will be released shortly, explaining its features. In particular, the new version will include:
- support for Liquid Network;
- greater flexibility in smart contract programming;
- new runtime with integrated wallet functionality;
- new developer tools.
During his presentation, Orlovsky also introduced RGB 20, the standard for issuing fungible tokens and assets on RGB. Among the features supported by the RGB 20 standard:
- transparent secondary issuance;
- report issuance and maximum supply;
- proof of reserve functionality;
- support for stock split operations;
- composable and extensible functionality via interface inheritance.
Among the assets already issued on RGB are USDN and BTCN, representing USDT and BTC, respectively.
The exchange of tokens issued on RGB can be done on KaleidoSwap, the new decentralized exchange on RGB. The tokens can also be transferred through the Lightning Network.
What emerges from the speeches at the Tuscany Lightning Summit is quite clear: for industry professionals, bringing stablecoins onto Bitcoin, whether using the RGB protocol or Taproot Assets, could prove to be a very interesting use case to incentivize the use of the Lightning Network.
