the key to the evolution of Bitcoin (BTC)?

Although it was upstaged by the BRC-20s and the Ordinals protocol, the Taproot Assets Protocol (formerly called Taro) might just be one of the best bitcoin network development options.

The creator of the BRC-20, DomoData on Twitter, qualifies itself the Taproot Assets protocol as the “best solution” for issuing assets on the Bitcoin blockchain.

What are Bitcoin Ordinals and how do they differ from NFTs?

This protocol, developed by the company Lightning Labs, pushes the limits of the possibilities of the Bitcoin blockchain and makes it possible to imagine many new use cases that could bring competition to many other infrastructure blockchains.

Could Bitcoin ultimately be the only real Ethereum killer? The Taproot Assets Protocol enables the issuance and transfer of assets on the Bitcoin blockchain. While taking advantage of the improvements offered by the Taproot update, its goal is to minimize its on-chain footprint.

This latest update makes it possible to embed data directly into a transaction. The optimization offered by Taproot makes it possible to issue and exchange assets on Bitcoin in a more confidential and scalable way.

Indeed, transactions of Taproot assets are performed off-chain, compressed in a Merkle tree, and then can be published on-chain.

The protocol allows its assets to be transferred through the Lightning Network, Bitcoin’s scalability solution. Thus, in a simple Taproot transaction, it is possible to create an asset, to exchange it, but also to open lightning channels.

The protocol allows the opening of two Lightning channels: one in BTC and one in a Taproot asset, allowing “Atomic swaps”, i.e. an instantaneous exchange between the two assets.

Note that a Taproot Assets protocol asset can also be a unique, non-fungible asset, more commonly referred to as an NFT.

Additionally, the protocol introduces a feature called “Universes”. They allow users to download and verify issuance and transaction data from Taproot assets. This increases the decentralization of the protocol and improves the user experienceespecially for those on mobile or with an unstable internet connection.

Thus, creating an asset on Bitcoin with Taproot Assets would be as easy as on Ethereum, and their exchanges would be even faster than on any other blockchain thanks to Atomic Swaps. In addition to using the apps and participating in their governance, opening Lightning channels with these new assets would provide a new way to actively participate in a project.

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The possibilities and advantages offered by the Taproot Assets Protocol

Thanks to the Taproot Assets Protocol, Bitcoin users will no longer be limited to holding only BTC in their wallets. This protocol opens up the field of possibilities, many projects could see the light of day and even migrate to Bitcoin. NFT, stablecoins, metaverses, decentralized finance (DeFi), the only limit is that of the imagination of the developers.

In the future, one could even imagine that these Taproot Assets will be integrated with other second layer solutions of Bitcoin, such as RGB, and thus recreate an ecosystem similar to Ethereum, but which would benefit from the robustness of Bitcoin.

Taproot Assets Protocol Assets Could Become a Centerpiece of Bitcoin Adoption by allowing its users to easily build their portfolios of Bitcoin and their local currency, to benefit from the technical characteristics of the network without being exposed to the volatility of BTC.

In effect, Taproot Assets could revolutionize the micro-payments industry and allow you to exchange US dollars, euros, and any other fiat currency, almost instantly and with extremely low fees.

Illustration of an L-USD / L-EUR exchange on Bitcoin between 2 Taproot Assets Protocol users

One could imagine the Salvadoran government creating a dollar stablecoin backed by its own reserves and implementing it in the Chivo wallet, allowing its citizens to exchange their satoshis and dollars through the Lightning Network.

If Taproot Assets were to become more widely used, this would increase the use of the Lightning Network and therefore make routing more cost effective. As a reminder, the Lightning Network works by opening a channel between two individuals who can exchange satoshis (or other currencies thanks to Taproot Assets). If you want to trade with someone who is not directly connected to you, then your transaction will go through other channels taking the most optimized path. The more your channels are used, the more fees they collect and the more profitable they are.

The Lightning Network is renowned for its speed in executing transactions and its low cost. Indeed, the scalability of this second layer of Bitcoin does not depend on the confirmation speed of its blocks (there are no blocks), but rather, as mentioned before, on the availability of its channels. Transfers are almost instantaneous, so the Lightning Network defies all other blockchains. Here, the number of transactions per second is not important. The more Lightning Network nodes, the more channels, the more scalable Bitcoin will be, regardless of the mainnet’s on-chain transaction congestion.

The decentralization of the Lightning Network depends above all on the decentralization of Bitcoin itself, since the opening and closing of the channels is done directly on-chain. Moreover, its decentralization depends on the distribution of its nodes: the more there are, the more efficient and decentralized the network will be, thus challenging beliefs about the blockchain trilemma.

Based on the Lightning Network, Taproot Assets would be the most decentralized and scalable assets on the market.

The creation of this type of infrastructure takes a long time, even more on Bitcoin, between security audits and additions of the functionalities necessary for optimal functioning from the start, Lightning Labs has a lot of work.

The development of the Taproot Assets protocol is making great strides and you can already play with the testnet protocol thanks to the Tiramisu Wallet. Lightning Labs is even developing the integration of Zero Knowledge Proofs into the protocol to further strengthen the confidentiality of the latter.

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Conclusion on Bitcoin’s Taproot Assets Protocol

So, is the Taproot Assets Protocol the best option for perfecting Bitcoin? In many ways, it seems so.

The protocol opens up a world of possibilities for Bitcoin that were previously reserved for other blockchains. They can boost activity on the Lightning Network, increase routing profitability, and make Bitcoin even more versatile and useful.

Ultimately, there is still a long way to go before Taproot Assets allow Bitcoin to rival Ethereum on its ability to host assets.

One thing is certain: the Taproot Assets protocol can certainly mark another important step for the democratization of Bitcoinbut also in the evolution of blockchain and cryptocurrencies more generally.

Read also: Lightning Labs raises $70 million and unveils the Taro Protocol

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Source : Lightning Labs