The controversial Taro protocol is ready for testing. The original version of the code is available on GitHub, and it allows “developers to mint, send, and receive assets on the Bitcoin blockchain.” Note that the company isn’t talking about the Lightning Network just yet. in one Blog post announcing the taro Lightning Labs promised, “Once on-chain functionality is complete, we will work to integrate the Taro protocol into lnd and bring Taro assets to the Lightning network.”
This is the first step of many and is aimed primarily at developers. According to Lightning Labs, “This initial release is designed for testnet use only to get developers started using the code.” That means no real-world value is currently flowing through Taro. But… what actually is taro? The blog post defines it as a “Taproot-based protocol for issuance of assets that can be transferred via Bitcoin and, in the future, the Lightning Network for high-volume, low-fee, instant transactions.”
Taro will allow stablecoins to travel through the flash
This is a multi-faceted protocol that allows for many things, but the feature everyone is looking forward to is the merger of stablecoins with the Lightning Network. It’s controversial because the issuer of stablecoins has to be trusted, which means they come with counterparty risk. Bitcoin does not have this problem. In any case, Lightning Labs tries to convince us that stablecoins over Lightning are a good idea in the subsection titled “The First Step To Bitcoinizing The Dollar”:
“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, and as trivially send value over the Lightning Network as they do do today. This leap forward will accelerate the path to take bitcoin to billions.”
If that sounds too much Galoy’s Stables, it’s because both implementations are trying to solve the same problem. However, they use very different methods. And place counterparty risk in different places.
BTC price chart for 09/29/2022 on Fx | Source: BTC/USD on TradingView.com
How does taro work and what else does it do?
Don’t worry, these brand new protocols are difficult to master or even understand. Luckily, Lightning Labs gave us a technical but easy-to-understand explanation to refresh us:
“Taro assets are embedded in existing bitcoin outputs, or UTXOs. Think of these assets as “UTXOs within a UTXO”. A developer mints a new Taro asset by performing an on-chain transaction that commits to specific metadata in a Tapoot output. When minting a new asset, the taro daemon generates the relevant witness data, associates the asset with a private key held by the minter, and sends the newly created Bitcoin UTXO to the Bitcoin network. This new endpoint becomes the origination point of the newly minted asset and acts as its unique identifier.”
If lightning speed first dealt with the subject of tarowe explained what a taro asset can be:
“What is a ‘taro asset’? Whatever you want, your BTC can be “converted into various assets like USD to EUR or USD to BTC.” Or as a bitrefil Sergej Kotliar puts it, “Pay in the sender’s choice of currency, receive in the recipient’s choice of currency. This means that each wallet can now have, for example, a native strike-type “USD Balance” feature. Since the wallet does not have to be trusted, the only trust lies with the issuer of the token.”
First steps with the novel protocol
As already mentioned, this alpha version is mainly intended for developers. If you are or know one, here are the coordinates of the log:
“To start exploring taro, Download the demon, Check out the API documentationand Read the Getting Started guide.. And for a more in-depth explanation of how taro works, dive deep into the Tarot BIPs and our documentation.”
Enjoy, developers. And please contact us with your results.
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