Taro Protocol to enable stablecoin payments across Bitcoin's Lightning Network
Guys, a few days ago, I did an interbank transfer- my recipient was not accepting cryptocurrency- and it took 24 hours to transfer funds from my account to theirs. Previously, an attempt to transfer funds via PayPal was stopped because of its arrangement with the government of my country which basically means that I can receive funds from PayPal, but I can't send funds.
This has been at the root of a bit of discomfort on my end, admittedly, particularly when dealing with persons who continue to utilize the traditional banking system. It's costly. It's inconvenient. It's unwieldy. But it's still mainstream.
For me, at a very basic level, when I was first learning about cryptocurrency, this freedom to send and receive funds privately, instantly, with minimal fees, and without an overseer telling me what I can and cannot do with my own money was extremely attractive.
Prior to this real experience though, I admit that I was sceptical. I didn't understand cryptocurrency, and when those with vested interests and the media told me that it was dangerous and underground and rife with criminals, I bought into the established narrative. This will be my eternal regret.
That said though, my friends, this is not a walk down memory lane. I'm actually excited today to discuss with you the latest development over at Lightning Labs where they're proposing to use the Taro protocol to enable instantaneous stablecoin transactions across the Bitcoin Lightning network.
It's coming together, guys. It's coming together, this is major, and I'm here for it. Let's discuss.
Bitcoin's Lightning Network
So just a quick refresher for those who may still be learning about Bitcoin's Lightning Network, it's a second layer on top of Bitcoin's Blockchain which allows for off chain transactions where parties can make or receive instant payments, including micropayments. That's a simple explanation. According to Cointelegraph, it "enhances the scalability of blockchain applications by managing transactions outside the blockchain mainnet (layer one), while still benefiting from the mainnet’s powerful decentralized security paradigm."
In terms of use cases, Bitcoin's Lightning Network is used by online Bitcoin payments company Strike, in El Salvador, and by Twitter's tipping feature among many others.
What is the Taro Protocol?
As you guys may recall, in November 2021, Bitcoin completed its Taproot upgrade. Investopedia has this article that explains what the upgrade entailed and what it meant for Bitcoin. In a nutshell, Bitcoin Magazine explains, "the Taproot upgrade allowed for complex spending conditions to be set for a Bitcoin UTXO while ensuring that only the condition that ultimately gets used to spend the coin is revealed on-chain to all Bitcoin users."
So the Taproot upgrade went live in November, making it technically possible for the Taro protocol to move stablecoins from the Bitcoin network to the Lightning Network, and this is what the team over at Lightning Labs is proposing: to pair the speed of the Lightning Network with the security of bitcoin and enable the use of stablecoins pegged to the price of the dollar in Lightning Network apps such as Strike.
Look out, VISA
Taro proposes to transfer assets on the Bitcoin Lightning Network by executing hundreds of thousands of transactions per second. This, says Lightning Labs CEO and co-founder, Elizabeth Stark in an interview with Tech Crunch, is a game changer as it will allow individuals without bank accounts to send and receive money in the form of stablecoins that represent their domestic fiat currency through mobile applications.
“If I were Visa," she tells Tech Crunch, "I’d be scared, because there are a lot of people out there that have mobile phones, but now don’t need to tap into the traditional system, and then the merchants don’t need to pay the 3% fee plus 30 cents [for a transaction]. You can have fees that are dramatically lower than the legacy system."
And though the Lightning Network itself won't be issuing stablecoins but merely providing the infrastructure to accommodate transactions, Stark is making it clear that she is betting on stablecoins staying around for a very long time. She tells the team at Decrypt: “Stablecoins are not going away. I think they’re only going to increase in adoption."
Lightning Labs raises multimillion dollar funding
Meanwhile, the Lightning Labs team and its proposal has captured institutional interest. The team recently announced that it has raised $70 million in Series B funding from a number of investors including Valor Equity Partners, global asset manager Baillie Gifford, Goldcrest Capital, Kingsway, Moore Strategic Ventures, Brevan Howard, Robinhood CEO Vlad Tenev, NYDIG, and Silvergate CEO Alan Lane.
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Well, guys, this is certainly welcome news. In developing economies, foreign exchange and the restrictions imposed on access via the traditional banking system is very often a huge challenge which affects industries and entire economies. And so, I look forward to following this story and reading the feedback of the developer community.
I'd like to hear your views though. Do you think that this latest proposal by Lightning Labs will contribute to increased global adoption of cryptocurrencies? And do you see this as a real threat to VISA and the traditional banking system? I'd love to hear your thoughts.
In the meantime, my friends, thank you for stopping by. It's never a dull moment on this end, so I'm off in search of another story.
Until we meet again, please remember to be safe. Arrivederci!
This article was first posted on Publish0x where I write under the pseudonym, I-HODL.
Resources
https://www.investopedia.com/bitcoin-taproot-upgrade-5210039
https://www.mail-archive.com/bitcoin-dev@lists.linuxfoundation.org/msg11209.html
https://bitcoinmagazine.com/technical/how-bitcoin-taro-protocol-works
https://www.theblockcrypto.com/post/140560/lightning-labs-taro-protocol-stablecoins-fundraise
I don't know where is the stand of our country is in regard to crypto. As always, we are behind. I believe it is a threat to banks that's why it is not encouraged. Here in my city, it's still the traditional way but I see one company that is bringing awareness to others by encouraging businesses to transact using their app. I have yet to try their app called Servicoin.