Testing is now possible for the controversial Taro protocol. This is the initial code version. Available at GitHub, and it enables “developers to mint, send, and receive assets on the bitcoin blockchain.” Notice that the company isn’t talking about the Lightning Network yet. A Taro announcement blog launch, Lightning Labs promised, “Once the on-chain functionality is complete, we’ll work towards integrating the Taro protocol into lnd, bringing Taro assets to the Lightning Network.”
This is the first step of many and it’s mainly aimed at developers. According to Lightning Labs, “this initial release is only designed for testnet usage as a way for developers to start using the code.” That means, no real value is flowing through Taro at the moment. But… what is Taro anyway. The blog post defines it as 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.”
Taro will enable Stablecoins Travel Through Lightning
Although this protocol allows for many different things, the main feature that everyone loves is the integration of stablecoins and the Lightning Network. It’s controversial because you have to trust the issuer of stablecoins, which means they come with counterparty risk. Bitcoin doesn’t have that problem. In any case, in the subsection titled “The First Step Towards Bitcoinizing the Dollar,” Lightning Labs tries to convince us that stablecoins over Lightning are a good idea:
“With Taro and the incredible developer community, we can build a world where users have USD-denominated balances and BTC-denominated balances (or other assets) in the same wallet, trivially sending value across the Lightning Network just as they do today. This leap forward will accelerate the path to bringing bitcoin to billions.”
This sounds too similar? Galoy’s stablesats, that’s because both implementations are trying to solve the same problem. Both implement very different strategies. They also place counterparty risks in various places.
Source: BTC/USD on TradingView.com| Source: BTC/USD on TradingView.com
Is Taro a Workhorse?
Don’t worry, these brand-new protocols are hard to master, or even understand. Luckily for us, Lightning Labs gave us a technical-but-easy-to-understand explanation as a refresher:
“Taro assets are embedded within existing bitcoin outputs, or UTXOs. Think of these assets as “UTXOs within a UTXO.” A developer mints a new Taro asset by making an on-chain transaction that commits to special metadata in a Tapoot output. A Taro Daemon creates witness data to mint a new asset. It assigns it to a private key that is held by the minter and broadcasts the newly created Bitcoin UTXO to bitcoin. This new outpoint becomes the genesis point of the newly minted asset, acting as its unique identifier.”
Lightning speed The Taro subject was first dealt withHere’s a description of what a Taro asset could be.
“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.”
How to Get Started with The Novel Protocol
The Alpha release, which is intended mainly to be used by developers, was previously announced. If you’re one or know of one, here are the protocol’s coordinates:
“To get started exploring Taro, Download the Daemon, You can check the API documentationAnd Read the getting started guide. For a deeper explanation of how Taro works, you can take a deeper dive into Taro BIPsAnd our documentation.”
Developers, have fun. We would love to hear your discoveries.
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