Taro: Have you ever heard of it? It’s an improvement proposal for the Lightning Network that Lightning Labs introduced in April. “Taro makes Bitcoin and Lightning multi-asset networks,” the company claims in the The latest issue of their newsletter. The protocol is explained in plain English.
“In a world of omnipresent communications connectivity, nobody says “cross-border messaging” anymore. Taro promises to do the same thing to “cross-border payments” by decentralizing the entire global FX market into a protocol that can run on a Raspberry Pi by anyone, anywhere.”
Are the Lightning Labs really that exaggerated? Is Taro really the protocol that will allow the Lightning Network to reach the next billion users? “The opportunity provided by Taro bringing assets like stablecoins to the Lightning Network is clearly enormous,” the company claims. Lightning Labs is able to support that argument and prove it. Let’s find out.
This is What Taro does and how it does it
Lightning Labs first explains the psychology behind their improvement plan. It almost seems like bitcoin’s Lightning Network will be serving Taro and not the other way around.
“Instead of starting from scratch and bootstrapping a new ecosystem of nodes and liquidity, Taro will leverage the existing network effects of both the infrastructure that’s been built out over the last several years plus the 4000+ BTC allocated to the network today as a global routing currency.”
But how does this work? The “edge nodes” are the key. By “integrating with Taro,” normal Lightning nodes can now “process an instantaneous conversion from L-USD into BTC or vice versa, for a small fee.” That means that “every Taro transaction on the Lightning Network will be converted into BTC by the first hop, routed across the network as BTC, and then converted back into a Taro asset by the last hop before the destination”
What is a “Taro asset”? Whatever you want, your BTC can be “converted into different assets such as USD to EUR or USD to BTC.” Or, as Bitrefil’s Sergej Kotliar puts it, “Pay in currency of sender’s choice, receive in currency of recipient’s choice. This means that every wallet can now have native Strike-type “USD balance” functionality for example. With no need to trust the wallet, the only trust lies in the issuer of the token.”
Trust is the key difference between Galoy’s StablesatsAnother innovative concept, which aims for similar results is the.
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What does Taro mean to The Lightning Network
Interview published in a recent issue by NewsBTC, AXX’s head of researchStrategy Ben Caselin further explained the protocol
“In Taro, smart contracts and asset transfers are not executed by the blockchain, and they are also not enforced by the blockchain. Instead, transfers are executed by the sender of an asset (who has to make a corresponding bitcoin transaction), and enforced by the recipient, same as the Lightning Network.”
Also, in the preceding Lightning Speed is what we thoughtWhat size development could this be for Lightning Network?
“According to The Bitcoin Layer, “a global capital market operating on top of bitcoin-denominated financial rails is inching closer with each new onramp.” And the Taro protocol and all of the assets it would bring to The Lightning Network is the mother of all onramps.”
Back to Lightning Lab’s newsletter, the company toyed with even bigger expectations. Here’s an example:
“A community bank could issue a local stablecoin on Taro and it would only need a handful of nodes or liquidity providers to make a market between the local currency and the BTC core of the Lightning Network to be connected to a global community of buyers and sellers. No permissioning required!”
They’ll Never See It Coming
According to Lightning Labs, bitcoin “renders cross-border payments obsolete.” Stablecoins are a huge business and so are cross-border payments. Taro is a strong player at the intersection of them. “Visa’s 65% operating margin is one of the highest of all the companies in the S&P 500 index, and this margin is Lightning and Taro’s opportunity. They’ll never see it coming.”
According to the company, the Lightining Network’s benefits for all employees will be immense. “We expect that bringing Taro to market and making Lightning a multi-asset network will dramatically expand the Total Addressable Market for those building Lightning applications.” And you know what more users mean, more of those sweet-sweet fees.}
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