Stablecoins running on Bitcoin are getting closer to becoming a reality thanks to new functionality developed by Lightning Labs using the network’s Taproot upgrade, which was implemented in late 2021.
Elizabeth Stark, the CEO of Lightning Labs, discussed the latest development from the Bitcoin development firm at FT Live’s Crypto and Digital Assets summit in London. She also provided an informative explanation of Bitcoin and the Lightning Network to an audience of traditional finance players.
Lightning Labs’ Taproot Assets protocol is working on adding functionality to enable stablecoins and tokenized assets on the Bitcoin network. According to Stark, developers have made significant progress in achieving this goal, including testing transactions on Lightning.
Stark emphasized that digital assets have traditionally operated on other blockchains that have faced challenges such as high fees. She argued that Bitcoin’s network is best suited to facilitate the use of stablecoins because it is the most secure and decentralized blockchain.
In her presentation, Stark also discussed the advantages of Bitcoin and stablecoins as a store of value, especially in countries dealing with inflation and devaluation of fiat currencies. She noted that stablecoin adoption has grown significantly since the COVID-19 pandemic, with many users in emerging markets.
Stark explained that the most loyal users are those seeking a stable store of value, and they use either Bitcoin, stablecoins, or a combination of both. She also highlighted the fact that the two largest stablecoin players, Tether (USDT) and Circle (USDC), hold more United States Treasury bonds than major nations like Germany and South Korea, despite end users not benefiting from the interest.
Given the rapid growth of the stablecoin market, Stark emphasized the need for infrastructure to enable the issuance of stablecoins and real-world assets on the Bitcoin blockchain. Lightning Labs is building this protocol to provide the necessary technology for asset issuers to tokenize real-world assets.
Stark also mentioned that financial institutions could use Lightning-powered stablecoins to issue gold assets, stablecoins, and other fiat-backed assets on Bitcoin and then transact over the Lightning Network. She highlighted the cost advantage of using Bitcoin compared to other blockchains and traditional finance systems, as it enables global transactions at significantly lower rates.
Overall, the development of stablecoins on Bitcoin’s network through Lightning Labs’ Taproot Assets protocol is a significant step forward in bringing stability and functionality to the cryptocurrency ecosystem.