RGB and Taro, two protocols that can issue stablecoin-like tokens to Bitcoin, take different approaches to solving similar problems.
This is an opinion piece by Kishin Kato, founder of Trustless Service Co., Ltd., a Lightning Network research and development company in Japan.
Demand for Bitcoin stablecoins is back as the Lightning Network offers significant scalability advantages. Currently, users in emerging markets who want to save money by trading in US dollars will settle for stablecoins on other chains, proponents say. Putting my personal feelings about these other blockchains aside, I acknowledge that bitcoin received via cheap cross-border transfers cannot be easily sold for dollars while it resides in a non-custodial Lightning Channel. I have to.
RGB and Taro are two new protocols that will enable token issuance in Bitcoin and are expected to bring stablecoin transactions in lightning. I have studied these protocols and the client-side validation paradigms they employ andThe Emergence of Bitcoin’s Token Layer” finished diamond handis a leading Lightning Network user and developer community in Japan and a Bitcoin-focused solution provider.
During this investigation, we noticed subtle differences in how these seemingly similar protocols were developed, and became interested in how these differences affected their trajectories. In this article, I would like to share my impressions of these projects and how they impact Lightning as we know it.
Priorities and thinking revealed through protocol development
Protocol development is not easy and often takes years. Deciding which features to compromise over is important, and one of the main differentiators between RGB and Taro is the decision they make in that regard.
RGB has ambitions as a smart contract layer over Bitcoin (not just tokens), with a robust on-chain protocol for performing off-chain state transitions. Careful design sacrifices conceptual complexity for great privacy, on-chain scalability, and versatility. Taro, on the other hand, appears to be more focused on off-chain uses such as the Lightning Network, specifying methods for multi-hop payments and token exchanges. However, among the practical shortcuts that Taro takes in favor of conceptual simplicity, he neglects to standardize at least one fundamental building block of the on-chain protocol.
Since Taro assets are stored using on-chain UTXO, Taro transactions can theoretically be constructed in two ways. One is where the sender pays bitcoins for the receiver’s output, and the other where the receiver provides his input to get paid. The former case is simpler, but the sender is effectively gifting Bitcoin. The latter is more accurate, but requires interaction between sender and receiver to create a transaction. Unless these methods and their choices are standardized, wallet interoperability is a pipe dream.
Perhaps Taro’s reluctance to standardize such basic components can be explained by its approach to development. Overall, RGB is being developed very transparently, but Lightning Labs seems to be reserving more control over his projects with Taro, making it more iterative to bring products to market. may take a feedback-based approach.
Indeed, once a protocol is widely adopted, it is difficult to update or replace it without compromising interoperability. However, this is not necessarily the case if your implementation is the only one. Lightning Labs may have deliberately delayed broad adoption of the protocol to ensure its ability to iterate quickly.The aforementioned gaps in standards and how Lightning Labs Taro wallet will be shipped by LNDits Lightning node implementation Over 90% market share.
Certainly, Lightning Labs’ approach could be more successful in bringing tokens to Lightning. But unless he relinquishes that dominant role at some point, Taro risks becoming little more than his LND API. It’s not hard to imagine that Taro will continue to be an LND-specific feature.
Will Lightning Survive Tokens?
As a semi-paranoid bitcoiner, I have to wonder if the proliferation of tokens in bitcoin will have a negative impact on the lightning network and bitcoin itself. The latter concern has been verified by Circle’s (USDC issuer), Ability to influence users during Ethereum’s potential controversial hard forkI would like to point out a specific concern about Lightning.
As mentioned earlier, if Taro’s approach continues, using the included Taro wallet in relation to other implementations will increase the usefulness of LND. This could further cement LND’s dominant position in node implementations. To keep Lightning decentralized, it’s desirable to spread users evenly across multiple implementations. This makes it impossible for even the most common implementations to simply implement protocol changes without impacting users.
I’m personally not a fan of most crypto tokens, but I believe the Lightning Network has something to offer users of such tokens in the future. It’s a fast, private, decentralized exchange and payment. Being able to instantly pay someone in their local or preferred currency without the sender owning that currency would very likely disrupt existing payment and remittance rails. It’s unclear which protocol will prevail for token issuance in Bitcoin, but we hope that token adoption doesn’t come at the expense of what Bitcoin and Lightning stand for.
This is a guest post by Kishin Kato. Opinions expressed are entirely his own and do not necessarily reflect those of his BTC Inc or Bitcoin Magazine.
