Taro- The Best of Both Worlds

Imagine being able to run not just Bitcoin but also other digital assets through the Lightning Network.  

So far, it has only been possible to transact on the Lightning Network with Bitcoin. But this April, Lightning Labs made a proposal to change that by offering Taro, a virtual machine protocol where users can deposit any kind of asset onto the Lightning Network. Users can then transact those assets within Lightning and receive all the speed and low-cost advantages of Lightning, just like they had done by using Bitcoin. 

Ryan Gentry of Lightning Labs had this to say about the Taro vision to “bitcoinize” digital assets in the Lightning Network: 

“We see Taro as an important step in bitcoinizing the dollar, getting the best of both worlds by 1) issuing assets like stablecoins on the most decentralized and secure blockchain, bitcoin and 2) allowing users to transact on the fastest global payments network with the lowest fees, Lightning.” 

Taproot is a major component of Taro. We have talked about Taproot in a previous blog post. Taproot will enable Taro to offer high volume traffic at low fees because what Taproot does is that it reduces the amount of data load for those transactions with multiple signatures. Taproot’s features will make it possible to issue and distribute NFTs, as well as ensure complete privacy when sending your assets through Taro. 

Taro is looking to introduce representations of national currencies, such as stablecoins, onto the Lightning Network through the Bitcoin blockchain. Users can route their native currencies through Lightning without the need to connect with any new networks in the process. So, we may see “bitcoinized” L-CAD (Lightning Canadian Dollar) and L-USD (Lightning US Dollar), within Lightning channels. 

Taro is subject to approval but, should it go live and then prove to be, it will be a massive development for the Lightning Network as it will be able to route transactions involving multiple assets. Taro will further strengthen the network effect of Lightning as it will pull in new groups of users who are attracted by low fees, high volume and high speed transactions but not yet familiar with the power of Lightning. Any kind of digital currency can route through Bitcoin and appear as inbound liquidity into the Lightning Network right at the moment when LQwD is expanding its own global network of routing nodes. LQwD is sure to leverage the boost in network traffic that will come courtesy of Taro.