Title: Taproot Assets on Mainnet: A New Era for Bitcoin and Beyond

Author: Ryan Gentry, Lightning Labs

Compiled by: Felix, PANews

Bitcoin Layer2 infrastructure company Lightning Labs released the alpha version of Taproot Assets on the mainnet on the evening of October 18, providing a fully functional development experience for issuing, managing, and exploring stablecoins or other assets on the Bitcoin blockchain. This version also begins to be forward compatible, meaning that there will be no major changes to the protocol that affect assets released on the mainnet. The mainnet version of the protocol supports on-chain functionality and will soon support the Lightning Network.

Lightning Labs claims that this release marks the beginning of a new era for Bitcoin. With Taproot Assets v0.3, builders have all the tools necessary to make Bitcoin a multi-asset network while maintaining Bitcoin's core value in a scalable manner. These new Taproot Assets Lightning transactions will be routed through the existing Bitcoin liquidity in the network core, allowing routing nodes to forward Taproot Assets transactions on the Lightning Network without being aware of them, thereby expanding Bitcoin's global network effect and strengthening the security foundation of the blockchain.

Early adopters have been iterating with the Lightning Labs team during the past few months of testnet development, minting nearly 2,000 assets on the testnet and synchronizing their nodes with the Universe server, a repository that contains all the information needed to initialize wallets and download specific Taproot Assets states, over 420,000 times.

The Taproot Assets Daemon is available in the latest Polar version, a rapid prototyping design tool commonly used by developers. In litd v0.12, Lightning Labs' toolkit includes lnd for node operations, liquidity management tools loop and pool, accounting tool faraday, and tapd for multi-asset support. To get started with the Taproot Assets Daemon: read the installation section, download the Daemon version, view the API documentation, and read the getting started guide. Please note that while this version supports the mainnet, the alpha label indicates a desire for the community to test for potential bugs. For a detailed explanation of how Taproot Assets work, dive into the BIPs and documentation.

Bitcoinization of the Dollar and Global Financial Assets

Chart from The Block, Hard Yaka

In the context of El Salvador designating Bitcoin as legal tender in 2021, the Lightning Network community has experienced explosive growth, especially in emerging markets. Users around the world are enjoying instant settlement, low fees, and peer-to-peer Bitcoin transactions without financial intermediaries. Lightning Labs has continuously received requests from developers for tools that can add stablecoins to their applications. The demand for stablecoins is immense. The amount of U.S. Treasury bonds held by stablecoin issuers exceeds that of major developed countries like Germany and South Korea, indicating the global significance of stablecoins.

As reported by Blockworks last week here, this demand exists because stablecoins are "better products than fiat currency in emerging economies." Stablecoins offer a better user experience in terms of accessibility, custody, and utility. Additionally, over 2 billion people live under double-digit or triple-digit inflation, making stablecoins more attractive in terms of price stability compared to the dollar.

Moreover, developers have been experimenting with real-world assets such as gold, U.S. Treasury bonds, and corporate bonds with programmatic coupon payments. Bitcoin's global liquidity, decentralization, and security provide the best platform for bringing these experiments to the mass market.

Stablecoin users, especially those in emerging markets, are quite pragmatic; they simply want the fastest settlement times and the lowest fees. The design of the Lightning Network has proven to provide this experience based on the security and decentralization of Bitcoin. Through Taproot Assets, the global demand of users is being brought back to Bitcoin and the Lightning Network. As stablecoins are integrated into Lightning wallets, users will be able to stack Sats at minimal cost when circumstances allow.

Building on Mainnet with Taproot Assets v0.3

For developers looking to participate in building, version 0.3 of the Taproot Assets protocol provides a complete set of tools to start issuing, managing, and exploring on-chain mainnet assets.

Fully Functional Issuance and Redemption API

First, the asset issuance API has been improved based on developer feedback. Batch issuance, which allows for minting multiple sets of assets at different times while maintaining fungibility. Issuers will use a group_key to sign newly issued assets, allowing users to automatically verify whether the newly issued assets are interchangeable with the old ones. Additionally, Taproot Assets v0.3 includes a new asset destruction API to facilitate asset redemption for issuers. By using this destruction feature, assets in supply can be provably destroyed, allowing issuers to safely release their real-world assets represented on-chain. By uploading proof of these destruction transactions to the public chain, issuers can automatically communicate this operation to the public, ensuring users receive the latest asset information.

Asynchronous Receiving Functionality

For on-chain Taproot Assets transactions, users need to send and receive assets when both parties are not online simultaneously. For the receiver, this means being able to generate an address that anyone can send to at any time. Taproot Assets v0.3 achieves this by providing developers with tools to add a Uniform Resource Identifier (URI) to on-chain addresses. The receiver's wallet will then synchronize with the specific Universe server detailed by that URI to download the off-chain proof data needed for the new assets they will receive in the future. This functionality will be handled in the background to ensure a seamless experience for asynchronous receiving.

Multiverse Mode of Universes

Universes are repositories that store all the information needed to initialize Taproot Asset wallets and synchronize specific Taproot Asset states. Multiple Universe servers can operate as a collective, maintaining synchronization for all servers for a given asset, so even if the issuer's server is offline, the receiver can verify the legitimacy of the sender's assets through many different data sources.

A major feature of Taproot Assets v0.3 is the introduction of Multiverse functionality. The Multiverse mode allows a given Universe server to support multiple assets and contain all relevant historical records for each asset. This mode enables developers to access and host all the data needed to build block explorers for users.

Improvements in Scalability, Security, and Developer Experience

Finally, the development of the mainnet alpha version of Taproot Assets has made significant improvements in security, scalability, and developer experience.

In terms of scalability, the new version includes a build-loadtest command that allows developers to stress test the software themselves. Lightning Labs has extensively used it internally to verify that the software is ready for mainnet deployment, and it is now being made available to developers to perform their own validation. To support DevOps teams in ensuring their infrastructure can handle the load of the Daemon, the ability to report metrics to Prometheus (a monitoring system and time-series database) has also been provided, allowing developers to better visualize the performance of their software.

In terms of security, Taproot Assets v0.3 has added more secure proofs, including block height and header validation, proof decoding limits to prevent resource exhaustion, reorganization security in the case of Bitcoin mainnet blockchain forks, and many other lower-level updates detailed in the release notes.

An important milestone is the addition of protocol version control for all upgradable parts of the protocol. This provides developers with the forward compatibility assurance needed to publish assets on the mainnet. Additionally, test vectors have been generated for Bitcoin Improvement Proposals (BIPs), allowing developers to verify the integrity of the protocol by re-implementing it themselves. Finally, this version includes numerous command-line improvements based on extensive feedback to provide the smoothest development experience.

Towards a Multi-Asset Lightning Network

With the completion of this version, Lightning Labs will shift its focus to the ultimate goal of Taproot Assets: making the Lightning Network a multi-asset network. Specifically, it aims to provide stablecoin support for users in a borderless financial world. Once the payment channel functionality of the protocol is completed, users will be able to send and receive the currency of their choice through the Lightning Network. Utilizing a distributed liquidity network to serve global markets will be a significant shift in how global capital flows operate. Asset issuers and users will be able to leverage the existing network effects of the Lightning Network, from Bitcoin liquidity to routing node markets, and a wide ecosystem of integrated wallets, exchanges, merchants, and more, without starting from scratch.

Before development begins, two main functionalities are needed: integrating payment channel functionality into the Taproot Assets protocol and building a multi-asset Lightning Network. Both channels have been delivered: the unannounced Taproot channel is now running in production with lndv0.17, and the draft specification for the Taproot Assets protocol channel has been published as a Bitcoin Lightning Improvement Proposal (bLIP). With the completion of this work and the release of the mainnet alpha version of the Taproot Assets Daemon, the ability to send and receive Taproot Assets through the Lightning Network will be smoothly delivered to the developer community.