Bitcoin Taproot Assets Protocol Feature Overview

Overview of Bitcoin's Taproot Assets Protocol Feature

Author: Ryan Gentry, Business Development Lead at Lightning Labs; Translation: Blockingxiaozou

Lightning Labs has recently released the latest version of the Taproot Assets Protocol daemon program (previously Taro). Taproot Assets v0.2 provides a core set of functionalities for developers who wish to issue, send, receive, and discover assets on the Bitcoin blockchain. Currently running on the testnet, it is expected to be deployed on the mainnet soon.

Lightning Labs states that the Taproot Assets Protocol has the potential to dollarize Bitcoin and bring multi-asset support to the Lightning Network. Lightning Labs will submit the final Taproot Assets specification as a series of formal BIPs to the community, merge Taproot channels, release a BLIP describing new Lightning functionality, and finally release the first testnet Taproot Assets payment channel on the Lightning Network.

The core set of functionalities for Taproot Assets Protocol developers includes:

· Sending and receiving assets using the new virtual partially signed Bitcoin transaction (vPSBT)

· Discovering and publishing assets using the initial Universe API

· Maximum chain space efficiency with multi-asset minting, sending, and receiving

· Stability and scalability improvements

1. What is the difference between Taproot Assets and other Bitcoin protocols?

(As shown above, due to the popularity of asset issuance, the confirmation price of Bitcoin transactions has skyrocketed. Source:

There has been a strong interest in asset issuance on the Bitcoin blockchain in the past few months, and asset issuance protocols use an extremely inefficient method of writing asset metadata directly into block space. While the excitement around building on top of Bitcoin is encouraging, the fee market’s response suggests that these protocols are not designed for scaled transactions. In fact, one of the creators of these protocols even believes that Taproot Assets “is undoubtedly a better solution” because it aims to efficiently handle large volumes of user-defined asset issuance and transfers on the Bitcoin blockchain.

The Taproot Assets protocol is designed to maximize off-chain operations, primarily to avoid the recent common phenomenon of blockchain congestion. With this version, an unlimited number of assets can be minted and/or transferred in a single on-chain transaction. This off-chain prioritized design allows asset miners and traders to take advantage of Bitcoin’s permissionless nature and grow their businesses without being limited by Bitcoin’s scalability constraints. Users can soon integrate their assets into the Lightning Network for instant, high-capacity, low-cost transactions. This leverages the existing network effects and installations of wallets, exchanges, and merchant programs, without having to bootstrap a new ecosystem from scratch.

It is important that the Taproot Assets protocol was designed with the needs of Bitcoin developers and users in mind from start to finish, both in terms of development tools and end-user constructs. For example, Taproot Assets inherits the existing Taproot VM, uses the unique address format familiar to Bitcoin users for each asset, and leverages the easily understood Partially Signed Bitcoin Transaction (PSBT) framework. Taproot Assets is also relatively light client-friendly, which means that assets issued using the protocol will be more easily accessible to people around the world. This feature is different from existing protocols in the asset issuance space, which require developers to run full nodes and maintain several GB of indices to keep track of all attached assets. These features will help developers build excellent user experiences on mobile devices and other low-resource-intensive devices as Bitcoin is promoted to billions of users.

The design of Taproot Assets makes permissionless asset issuance and transfer easier, minimizes the required on-chain fees, and will soon enable developers to access the rapidly growing Lightning Network. As developers begin using Taproot Assets, it should significantly reduce chain congestion, providing space for Bitcoin to attract mass users.

2. What new development tools are available in Taproot Assets v0.2?

The Taproot Assets daemon v0.2 provides a core set of on-chain asset issuance, transfer, and discovery functionalities for testnets (plus regtest and simnet) and will soon be released for the mainnet. This version provides developers with all the tools they need to build great application experiences for users and will soon support the Lightning Network. Let’s take a closer look!

(1) The Application of Taproot Assets PSBT

Firstly, Partially Signed Bitcoin Transactions (PSBTs) are a community standard that defines how developers can support users in building, signing, and verifying Bitcoin transactions with ease. PSBTs are widely supported by Bitcoin wallets, allowing seamless interoperability, and we are pleased to announce that Taproot Assets now supports PSBTs by default, joining this interoperable Bitcoin software ecosystem.

Importantly, this support also extends to pure off-chain Taproot Assets transactions, which have a novel structure and are called “virtual Partially Signed Bitcoin Transactions” (vPSBTs). The way vPSBTs work is the same as Bitcoin PSBTs, but deals with all the complexity of the Taproot Assets protocol, so developers can continue to build on their best layer. Taproot Assets uses vPSBTs to create off-chain transfers or state transitions. Traders will ping-pong their vPSBTs back and forth to generate the necessary witnesses and inclusion/exclusion proofs. Once finalized, these vPSBTs will be “anchored” to the Bitcoin chain by compiling the asset tree into taproot outputs, then signing and submitting the PSBT transaction that includes these outputs. It’s worth noting that vPSBTs simply add additional Taproot Assets asset tree information to the Bitcoin PSBTs familiar to Bitcoin developers. In this latest version, developers can now integrate vPSBTs into their existing applications, abstracting away all the low-level complexity surrounding the Taproot Assets structure. This enables them to focus on building amazing experiences for users, rather than focusing on Merkle trees. We look forward to seeing vPSBTs on-chain markets, hardware wallets, and Lightning channels soon!

(2) Universe brings the highest scalability

Next up is Universe, together with APIs!

Good news, Taproot Assets Universe allows users to download and verify the asset release and transaction data of Taproot Assets. The operation of Taproot Assets does not require this, as transactions can be sent purely peer-to-peer, but this greatly improves the user experience, especially for mobile users or unstable Internet users. For example, new user Alice can download the Taproot Assets wallet, synchronize with the issuer’s Universe server, and immediately be able to verify the total supply of a given asset, which block each issuance transaction occurred in, and verify that the assets Bob is attempting to transfer to her are issued by the expected issuer. Developers can now use these Universe APIs to help users easily discover Taproot Assets when building products such as Taproot Assets block browsers. We are very excited to witness the construction results of the ecosystem!

Developers can think of Universe servers as full Bitcoin nodes for specific assets, as they contain the historical data required to verify that the asset being received is actually issued by the expected issuer. Universe can also be understood as similar to Git, which is an existing, easy-to-understand distributed version control system, in which information is efficiently distributed in a decentralized synchronization manner among interested servers.

For a specific example, if Alice pays Bob for a sticker with an asset named L-USD, Bob would want to prove that the L-USD is real. Universe servers provide such a proof mechanism, as his wallet can synchronize with the L-USD issuer’s Universe server, download all initial issuance transactions, and verify that Alice’s L-USD asset was originally issued by the L-USD issuer. Importantly, running a Universe server for a given asset is permissionless, and Taproot Assets v0.2 supports a Universe server alliance that keeps in sync with a given asset, so even if the issuer’s server is offline, Bob should have many different data sources to verify whether Alice’s asset is legitimate. Finally, the state of the Universe server is combined into another tree, making it clear and simple to synchronize state between Universes.

(3) Multi-asset forging improves chain efficiency

As previously mentioned, the core design principle of Taproot Assets is to maximize chain efficiency. This version fulfills this principle by allowing users to perform all protocol operations (forging, sending, and receiving) involving multiple Taproot assets in a single chain transaction. For example, users can forge three new types of three different assets at once, pay a mining fee only once, and then sell all newly forged assets to buyers who pay with different Taproot Assets using a single vPSBT, without requiring new on-chain transactions for each asset transfer. We hope to enable Bitcoin developers to become excellent managers of chain space without doing much more, and these new features precisely achieve this.

(4) More Stability and Scalability Improvements

Finally, this release contains a large number of scalability and stability improvements, providing a secure and stable foundation for developers seeking to build on top. These include better prevention of integer overflow issues and batch APIs that support large numbers of concurrent users. Additionally, asset metadata has been optimized for future portability, allowing developers to include up to 800 KB of metadata per asset when minting, with only the metadata hash value needed for inclusion in subsequent chain transfers. The developer community has already been soliciting feedback on how to build this Taproot asset metadata, so stay tuned!

(5) The Road to Stablecoins on Lightning

With this release, we further advance the ultimate goal of Taproot Assets: to make Lightning a multi-asset network, particularly providing stablecoin support for users in emerging markets. Once we complete the protocol’s payment channel portion, these users will be able to open Taproot Assets channels with their chosen pricing unit, onboarding to Lightning at the edge and interoperating with the existing Lightning network. Assets won’t need to rebuild the liquidity network components through a new ecosystem of bootstrapping nodes and liquidity. Instead, the Taproot Assets protocol leverages the existing network effects of Bitcoin and Lightning, as well as the infrastructure built over the past five years, ensuring that nearly 5,500 BTC allocated to the network today serve as a global routing currency.

For routing nodes at the network core, Taproot Assets’ “edge node” model should mean higher capacity without upgrades, as multi-asset transactions are routed via BTC. For users at the network edge, this should mean all of Lightning’s technical advantages – instant settlement, efficient fees, global coverage – and the ability to use their preferred pricing unit. We envision not only developers integrating Taproot Assets into existing experiences for merchants, creators, and all Lightning users to expand their total addressable market, but also developers building entirely new experiences that make it easy for brand new Lightning users to send assets for payments.

To bring Taproot Assets to Lightning, the unpublished Taproot channel will complete the specification review process. This ongoing work is a major feature of the next Lightning release, and once released, Taproot Assets will be integrated with payment channel functionality and the multi-asset Lightning network!