Bitcoin Maxis are patting themselves on the back after the launch of the Taproot Assets protocol for Bitcoin and Lightning. And they’re quite right to do so.

Lightning Labs mainnet Alpha launch last month was big news. Up till now Ethereum and Tron dominated smart contracts. Now with this latest protocol Bitcoin is poised to challenge their dominance and bring new vigor to the network. This new feature will equip developers with the tools needed to make Bitcoin a multi-asset network, enabling users to hold real-world assets like gold on the Bitcoin blockchain, marking a critical moment for Bitcoin’s evolution.

But Lightning’s Taproot Assets have even wider consequences than what they initially received hype for. With the next bull run warming up on the sidelines, the demand for diverse use-cases is intensifying. This will create huge opportunities for networks and developers alike. Not only will a diverse ecosystem expand blockchains global reach but it will foster an environment of inter-functionality that will in itself breed novel use cases.

Bitcoin may have entered a new stage in its development, but it isn’t just Bitcoin that stands to benefit from this. Rather than seeing Web3 as a zero-sum game, Isn’t it time we eschewed maximalism in crypto and welcomed an industry that supports a wide and healthy ecosystem?

Ethereum Or Bitcoin? Or Neither?

The Ethereum platform has, up till now, been the de facto platform for smart contracts and DeFi. As the world’s largest cryptocurrency by market capitalization, if Bitcoin extends its role beyond being merely a store of value and ventures into the realm of smart contracts, it could unsettle Ethereum’s standing. But this doesn’t mean it will definitely become the leader in this field.

With the pace of technology pushing Web3 to the forefront of many sectors, innovation houses around the world are rushing to keep up with the demand for Web3 solutions. An isolated network cannot hope to build Web3’s future by itself. Rather than viewing the development of a second major multi-asset chain as a shift in the Web3 leaderboard, this is instead an opportunity for the industry to diversify.

Ryan Gentry, Head of Business development at Lightning Labs shared his thoughts in a recent interview on how the Taproot Assets will contribute to a “spiderweb network of tunnels” that augments the network’s capabilities: “When I think about the lightning network from an infrastructure perspective, I think about it in the same breath as electrical power grids, oil pipelines, fiber networks. This is mission critical infrastructure, or it will be mission critical infrastructure for the world”.

This idea of a network of tunnels spreading in Web3 brings to mind Metcalfe’s law, a term initially pitched by Bob Metcalfe, inventor of Ethernet, who described the network effect as a centripetal force that makes networks more valuable the more things they connect to. Essentially, the more people join any network, the more other people are likely to join. Social media is the biggest example of this, but this phenomenon will hold increasing significance in Web3 as we witness greater use-cases emerging.

While it is true that the network effect can help incumbent projects and networks maintain their competitive advantage, the demand and popularity generated by one one group can also have a similar impact for others.

Diversification Is Key To Web3’s Success

Web3’s thought-leaders in the space have been quick to share their thoughts on Taproot Assets, largely focusing on how this will benefit Bitcoin’s scalability. But while many Web3 pundits may converge on Bitcoin as standard, the reality is that Web3’s future is more extensive than most of us will ever get to experience. Antoni Trenchev, Co-founder of Nexo, talked about the broader implications of Taproot Assets in a recent Tweet: “think about overall ecosystem scalability – imagine how many more users and transactions can be processed by blockchain companies with a second major multi-asset chain. This is a treasure trove for adoption. It’s not Bitcoin OR Ethereum, it’s Bitcoin AND Ethereum.”

Those who believe that Bitcoin is the only blockchain-based digital asset that will be needed in the future cannot foresee the use-cases that will require niche blockchains as well as major multi-asset chains to support them. Beyond just financial solutions, Web3 is experiencing a boom that is pushing it into almost every area of technology, revolutionizing the entire economy. Hundreds of billions of capital is locked into Bitcoin, most of it as a passive store of value, and the demand for use cases around Bitcoin is increasing. Instead of competing with Bitcoin, other layer-2 protocols, such as Stacks and Liquid Network provide novel use cases for holders of bitcoins. And many more Layer 2s are emerging, looking to tap into the hundreds of billions in capital that currently lies dormant.

Surviving The New Digital Era

As our world’s economic landscape shifts, brought about by advances in AI, machine learning, and other technologies, it is becoming increasingly clear that Web3 will be a centrifugal force in the new digital era, opening the door to new innovations and business models. This large scale adoption will require diverse networks and infrastructure that will support future use-cases. As important as healthy competition is for disruption, the industry needs to make sure it also champions inclusivity and fosters the community that it was built on. Bitcoin maximalists, or anyone who believes in a single-chain monopoly, need to step back and look at the bigger picture, that network scalability is not as valuable as ecosystem scalability. Having more than one major network is not only valuable, it’s essential in order for Web3 to scale and its many startups to have the best chance at success. 

This is a guest post by Sadie Williamson. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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Taproot Wizards, a Bitcoin Ordinals project focused on advancing Bitcoin’s capabilities, has secured $7.5 million in funding to assemble a team of top tier developers to build on Bitcoin. 

The investment round was led by Standard Crypto, with Geometry, Collider Ventures, StarkWare, UTXO Management, Bitcoin Frontier Fund, Masterkey and Newman Capital participating in the raise as well.

“We went for a larger seed round of $7.5 million because we feel time is of the essence,” said Taproot Wizards co-founder Udi Wertheimer. “We’ve been bullish on bitcoin for a decade but we genuinely believe that the best time to build in bitcoin is now.”

Taproot Wizards aims to assemble a solid team of developers to further develop tools and applications that leverage the full potential of the open source protocol. The project’s mission revolves around maximizing the potential of Taproot, an upgrade designed to enhance Bitcoin’s privacy, security, and efficiency. 

“We’re focusing on adopting the best breakthroughs in broader crypto research to advance bitcoin and ordinals, for example the open-source rollup work we’ve shared a couple of months ago, and will use this funding to build a team of top-notch bitcoin builders,” Wertheimer continued.

Taproot Wizards’ focus lies in fostering an ecosystem where developers can collaborate and create solutions that harness the power of Bitcoin. The project aims to pioneer novel applications, improve scalability, and fortify Bitcoin’s security infrastructure.

“Not only do we find Bitcoin NFTs very compelling as assets; we also believe the Ordinals movement has a chance to reignite Bitcoin innovation much more broadly — which we think is needed for Bitcoin to achieve its full potential,” said Alok Vasudev, co-founder of Standard Crypto. “While stewardship of an important NFT collection and its community can be quite valuable on its own, we think Taproot Wizards has an even bigger opportunity to leverage its brand as a distribution channel for new Bitcoin infrastructure.”

As the Bitcoin industry continues to evolve, Taproot Wizards strives to encourage builders to push the boundaries in unlocking new possibilities within the realm of Bitcoin, leveraging the Taproot upgrade as a cornerstone for innovation and development.

Disclaimer: UTXO Management’s parent company, BTC Inc., is also the parent company of Bitcoin Magazine.

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Bitcoin-focused company Lightning Labs has launched the Taproot Assets mainnet alpha daemon.

Simply put, Taproot Assets uses Bitcoin’s technology to handle, create, and delve into stablecoins and other assets. Think of it as a modern financial tool, backed by Bitcoin’s known security and decentralized features. The current version, Taproot Assets v0.3, enables developers to transform Bitcoin into a network that can support various assets, all while maintaining its foundational principles.

The main aim here is to evolve Bitcoin. It’s not just about it being a cryptocurrency anymore. It’s about making it a global network for digital money transactions. By merging Taproot Assets with Lightning transactions, the way we understand financial exchanges might undergo a significant shift, making them more in tune with Bitcoin’s built-in liquidity.

From its white paper release last year to now, the journey has been a combined effort. Inputs from the Bitcoin developer world, lessons from the testnet phase, and the support from early users have all played a part in shaping Taproot Assets. During its test phase, close to 2,000 assets were created, with nodes connecting to the ‘Universe server’ (a key source for Taproot Asset data for wallets) more than 420,000 times.

For those interested, Taproot Assets daemon is available in the recent versions of Polar and litd v0.12, packed with tools from basic node operations to support for multiple assets. It’s important to note, however, that even with its potential, it’s in its early stages. Continued community feedback and testing for any possible risks is vital.

Looking back, Bitcoin’s significant step into mainstream finance came when El Salvador recognized it as official currency in 2021. After that, the Lightning Network saw remarkable growth, particularly in developing regions. The rising demand for stablecoins globally played a crucial role. Considering their digital nature, stablecoins can often be more appealing than local currencies in areas with high inflation. For the roughly 2 billion people facing steep inflation in their local currencies, the consistent value of stablecoins, usually tied to the dollar, is attractive.

There’s also a growing interest in incorporating real assets like gold, company bonds, and US government bonds into the Bitcoin sphere. Many believe that with Bitcoin’s vast reach, decentralized system, and strong security, these assets can be more accessible to the general public.

The Taproot Assets v0.3 update invites developers to explore mainnet assets further. With user-friendly APIs for creating and redeeming assets and support for tranched issuance, the process is streamlined. There are also features to ensure physical assets linked to these digital ones can be safely retrieved.

For transactions on the Taproot Assets chain, a new asynchronous receive function means assets can be sent or received anytime, even if both parties aren’t online at the same time. This update also introduces ‘Multiverse Mode’, giving developers a thorough tool for block exploration for users.

This version also sees improvements in security, scalability, and user experience. Additions like Schnorr signatures, PSBTs, and witness fields make it even more robust.

This is just a starting point. The team behind Taproot Assets aims to make Lightning a network that supports multiple assets. The prospect of transferring any currency over the Lightning Network, using Bitcoin’s extensive liquidity, is now within reach.

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