Written by: Yinan
What are Taproot Assets?
Taproot Assets is a new protocol based on the Bitcoin blockchain that leverages Bitcoin’s latest upgrade, Taproot, to achieve greater privacy and scalability, providing developers with core functionality for issuing, sending, receiving, and discovering assets on the Bitcoin blockchain.
Protocol Overview:
Taproot Assets (formerly known as Taro) is a new Taproot-based protocol that allows assets to be issued on the Bitcoin blockchain. These assets can be deposited into channels on the Lightning network and transferred across the existing Lightning network.
The protocol was designed to avoid blockchain congestion by allowing unlimited assets to be created and moved in a single on-chain transaction.
Privacy and Scalability:
Taproot Assets leverages Taproot’s new tree structure, enabling developers to embed arbitrary asset metadata in existing outputs. It uses Schnorr signatures for increased simplicity and scalability, and importantly, works with multi-hop transactions on the Lightning Network.
Transactions and asset transfers:
Taproot Assets allow assets to be transferred through on-chain transactions or over the Lightning Network after being deposited into a channel. Participants involved in the transfer of Taproot Assets bear the cost of verification and storage, which is achieved by storing Taproot Assets witness data in local data stores or information warehouses called "Universes".
Interoperability with Lightning Network:
With Taproot Assets, assets can be deposited into Lightning network channels, and nodes can provide atomic conversions from Bitcoin to Taproot assets. This enables Taproot assets to interoperate with the broader Lightning network, thereby benefiting from its coverage and strengthening its network effect.
Other features:
Taproot Assets also allows for atomic swaps between assets and BTC, handles unique and non-unique assets and collections, supports creative multi-signature and co-signature arrangements, and enables the creation of Taproot Asset channels and BTC channels in the same UTXO, enabling Taproot Assets to exist in the Lightning Network without consuming additional resources.
What Taproot Assets can do
Taproot Assets allows the creation and exchange of different assets (such as other kinds of tokens) on the Bitcoin blockchain. Taproot Assets is a great alternative token protocol, but currently a relatively ordinary non-fungible token protocol implementation. Taproot Assets does not use Bitcoin as a full data availability layer (like the Lightning Network). Here are some possible use cases:
- Introducing stablecoins on Taproot assets (the main direction of lightning lab)
- Issuance and transfer of other tokens on Taproot assets
- Asynchronous receive functionality and one-to-many token send transfers in a single transaction
- Taproot assets + Lightning Network implementation for Bitcoin DeFi use cases
-Combination with BRC-20, Atomicals proof-of-work mining, etc.
- Creation and transfer of ERC-721 and ERC-1155 assets (ps: metadata is not stored on-chain)
Similarities and differences between Taproot Assets and other Bitcoin meta-protocols
Taproot assets are much like Bitcoin meta-protocols like Ordinals, BRC-20, Runes, Atomicals, TAP, PIPE, or RGB. Taproot assets are completely UTXO-based (just like Runes and PIPE), which means it integrates well with Bitcoin native technologies like RGB, Lightning Network, DLC, etc.
Taproot Assets does not use Bitcoin as a full data availability layer (like the Lightning Network does), unlike Ordinals, BRC-20, Runes, PIPE, etc. Users store their own data by default, or you can add additional trust assumptions through off-chain data storage (called Universe).
In this case, off-chain means storing it on your own machines (which is the default option) or using Universe (essentially an off-chain indexer/data availability layer) to store it. This is also where the risk lies, if you or the third-party index you rely on loses the off-chain data, you basically lose your tokens.
Taproot assets progress
Over the past few months of testnet development, early adopters have iterated with the team, minting nearly 2,000 assets on the testnet and syncing their nodes with the Universe server, a repository that holds all the information required for wallet initialization and downloading wallet states for a specific Taproot Asset, over 420,000 times.
Currently, Taproot assets v0.3.0 alpha is the alpha version of the mainnet, and this version also begins to be forward compatible, which means that the protocol will no longer have any major changes that will affect assets issued on the mainnet.
Because Taproot assets do not use Bitcoin as a complete data availability layer, they also rely on the development of third-party storage and other indexes, including the technical barriers of the Bitcoin protocol, which make it difficult for many non-technical users to enter the protocol. Currently, participation in Taproot assets requires running Bitcoin full nodes/btcd and lnd and tapd nodes. Lowering the entry threshold for participation depends on the construction of third-party infrastructure, such as wallets that support taproot assets and third-party indexers, and reducing the conditions for users to run nodes themselves.
Introduction to Lightning Labs
Lightning Labs is a company focused on blockchain and Bitcoin technology, with its main focus being the Bitcoin Lightning Network. In addition to the open source Lightning Network implementation (LND), Lightning Labs also offers commercial products and services such as Lightning Pool (a Lightning Network node pool solution) and Lightning Loop (a service for moving Bitcoin in and out of the Lightning Network).
Summarize
From Ordinals to Brc-20, BRC-20, Runes, Atomicals, TAP, PIPE, RGB, Taproot assets and other Bitcoin meta-protocols that have emerged and received public attention, the Bitcoin ecosystem has become more and more prosperous. In the bear market, Bitcoin community builders continue to output and bring a bit of residual heat to the market. Undoubtedly, the Bitcoin ecosystem will be a major narrative that cannot be ignored in the next bull market. The launch of the alpha mainnet of Taproot assets has also attracted much attention from Bitcoin builders. We look forward to seeing more interesting and creative projects such as Taproot assets+ordinals or Taproot assets+Atomicals and Taproot assets+Bitvm.
