Taproot Assets

Taproot Assets is a protocol developed by Lightning Labs for issuing and transferring assets, such as stablecoins, on the bitcoin blockchain by embedding asset commitments inside ordinary Taproot outputs. It was announced in April 2022 under the name Taro, renamed after a trademark dispute, and reached bitcoin mainnet with version 0.2 in October 2023.

How it works

Rather than recording asset data on chain, Taproot Assets stores it in off-chain Merkle trees whose roots are committed inside bitcoin UTXOs, so an asset transfer looks like a normal Taproot transaction to the rest of the network. Issuance and transfer histories are published through repositories called universes, which wallets query to verify the assets they receive. Because the assets ride on bitcoin outputs, they can also move through Lightning channels, with routing nodes converting between the asset and bitcoin along the path. The design goal is multi-asset payments, dollars at the edges, bitcoin as the routing medium, without new tokens on the base layer or changes to consensus rules.

In the gold vs bitcoin debate

Taproot Assets blurs a line the two camps usually draw sharply. Tokenized gold already exists, with products like PAX Gold representing vaulted metal on Ethereum, and a protocol for assets on bitcoin means gold claims could circulate over bitcoin's rails. Bitcoiners see this as the settlement network absorbing all assets, including their rival; skeptics note that any tokenized asset, unlike bitcoin itself, reintroduces an issuer and a custodian whose promises must be trusted.