Taro Launches Stablecoins on Bitcoin – Bitcoin Magazine

by James · September 28, 2022

Lightning Labs on Wednesday released the first version of its open-source Taro software to enable the minting, sending and receiving of assets on the Bitcoin blockchain.

Taro daemon’s alpha release enables developers to issue tokens on the testnet, an alternative Bitcoin blockchain created specifically for public testing. It allows developers to test applications with testnet coins instead of actual BTC with the added advantage that the actual Bitcoin blockchain (mainnet) is not exposed to any risk. Projects usually go live on the mainnet only after extensive testing and bug fixes are done.

Lightning Labs said in a statement that Lightning Network integration, a key feature of Taro for instantly sending and receiving assets, will be enabled in a future development phase. The functionality requires Taproot channels to first be merged into the company’s Lighting implementation (LND), which is currently a work in progress.

Meanwhile, the company said it is working on adding “universe functionality” to Taro’s daemon, which will allow users and asset issuers to provide proof of asset provenance and supply issuance, as well as more easily interact with asset data. Universes will be added to the daemon in the coming months, along with other improvements.

How Taro works

Announced in April, Taro leverages Taproot, Bitcoin’s last major upgrade that went live last year, to enable the issuance of assets in a private and secure manner without inflating the Bitcoin blockchain. Lightning Labs’ proposal differs from most existing alternatives for the assets-on-Bitcoin use case in that it does not require a separate blockchain nor does it rely on adding additional data directly to the chain.

Under the hood, Taro brings assets to Bitcoin through the “leaves” of the Taproot script tree, as each leaf of the tree is completely independent and can be selectively exposed – enabling structured engagement. By adding information about these assets (known as metadata) to the Taproot script tree, the proposed protocol can act as a layer built on top of Bitcoin, allowing Taro asset transactions to look like regular Bitcoin transactions – as only Taproot- the output is revealed on-chain –– while enabling proof of the movement of assets across the transaction graph.

A Taro asset is issued through an on-chain Bitcoin transaction that includes the hash of (commits to) some metadata in a Taproot output. Taro assigns the asset to a private key held by the issuer and broadcasts the transaction to the network. The newly created Unspent Transaction Output (UTXO) then acts as a unique identifier for that asset, serving as its point of origin. Multiple assets can be transacted with a single Bitcoin transaction, and when Lightning integration is enabled, the technology will enjoy the second layer network’s instant transfers for sending and receiving assets cheaply and efficiently.