A visual representation of the cryptocurrency bitcoin.
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There is a new and low cost way to quickly send US dollars around the world without a bank. It is based on Bitcoin.
Blockchain startup Lightning Labs announced Tuesday that it will launch the Taro Protocol, a technology that will route stablecoins pegged to fiat currencies and other digital assets through the bitcoin cash network. The project is still in development mode.
It uses Taro Lightning, a payments platform built on a Bitcoin core layer that enables high-volume, instant and low-fee global transactions using the Bitcoin blockchain security.
“It’s one of those things where people don’t really know how the credit card system works — and it just works,” Elizabeth Stark, CEO of Lightning Labs, told CNBC.
This “tier two” payments platform is usually all about making it easier to spend and receive bitcoin – but Lightning Labs decided to extend the use case for this technology to other types of virtual cash.
“With this technology, you can direct all the world’s currencies through bitcoin,” Stark said.
“People will be able to seamlessly switch between bitcoin and say, a stablecoin in US dollars, pesos, euros, yen, etc., and they can send these currencies globally, instantly and at very low fees,” she said.
How it works
There is bitcoin, the asset class, and then there is the global interoperable bitcoin cash network. Lightning Labs is working to get rid of the latter.
You can think of Taro’s payment workflow as enabling Bitcoin to operate as a mixture of SWIFT (the communication layer) and correspondent banking (the routing component).
Normally, all nodes must agree to confirm the transaction on the bitcoin network, and verify each transaction on the blockchain. The operation highlights one of Bitcoin’s greatest strengths: the high degree of network decentralization, which is a large part of what ensures its security. But it’s also relatively slow, averaging five transactions per second on the Bitcoin core layer, and can be expensive.
On the Lightning Network, not all network participants need consent. Instead, nodes only validate transactions with which they interact directly.
This difference is the key. Stark told CNBC that it is possible to carry out hundreds of thousands of transactions per second on Lightning.
Then there is the cost.
“Light transactions can be fractions of a penny… while a bitcoin transaction at the underlying protocol layer can be much more expensive than that,” said Alize Keelen, founder and managing partner of bitcoin-focused Steelmark.
Twitter incorporated Lightning tipping in 2021 and the technology has already been rolled out worldwide in places like El Salvador, which submitted legal tender for bitcoin in September 2021.
But Lightning Labs says the Taro protocol represents a major step in Lightning’s ability to serve as the Internet’s primary value transfer protocol.
“From our point of view, we are particularly interested in the fiat and stablecoins aspects, because we are really big in emerging markets,” Stark explained. “This is something close and dear to our hearts. We’ve seen a lot of adoption out there, and there’s a huge demand for it.”
The ultimate goal is to create a frictionless slope of the global economy that only requires a mobile phone, in order to involve as many people as possible in the process.
Lightning Labs — which also announced that it has raised $70 million in Series B funding led by early partners Valor Equity from Tesla and SpaceX — says it is releasing technical specifications for the Taro protocol, so it can incorporate feedback from developers as it continues to build the protocol.