Lightning Labs, the leading blockchain development company developing on the Lightning Network has created a new protocol that aims to allow for new tokens to be built on top of Bitcoin.
On Tuesday, Olaoluwa Osuntokun, Lightning Labs’ chief technology officer, wrote that he had designed a new protocol, dubbed Taro.
“Taro is a Taproot Asset Representation Overlay which allows the issuance of normal and also collectible assets on the main Bitcoin chain. Taro uses the Taproot script tree to commit extra asset structured meta data based on a hybrid merkle tree I call a Merkle Sum Sparse Merkle Tree or MS-SMT.”
Osuntokun says that the script allows for the unlocking and transfer of assets, “say like a USD stablecoin,” which would increase the demand for the Lightning Network. Lightning Labs won’t be directly issuing a stablecoin, but providing the infrastructure for other entities to do so.
Speaking to TechCrunch, Lightning Labs co-founder Elizabeth Stark said that the new protocol would essentially allow users who don’t have bank accounts to send and receive money in their local fiat currencies in the form of stablecoins through a mobile application.
“If I were Visa, 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,” Stark said.
According to DeCrypt, $70 million in Series B round capital was raised with participation from Baillie Gifford, Robinhood CEO Vlad Tenev, Goldcrest Capital and others in an effort to implement Taro.
The implications of Taro may put Bitcoin on an easier path towards becoming a widely-used means of payment, after years of debates on scalability.
As Lightning Labs’ Stark said:
“One of our core tenets at Lightning Labs is solving real problems for real people, and we’ve talked to myriad community members in emerging markets who’ve told us what a big difference stablecoins on bitcoin and Lightning would make in their economies. “