What is Bitcoin and who is it for? There are a ton of catchphrases available on Twitter to cover this one. Bitcoin is for everyone… no wait, it’s for everyone! Bitcoin is a store of value. Bitcoin is a medium of exchange. We could make a classic appeal to authority and declare that Bitcoin is exactly what Satoshi described, “A Peer-to-Peer Electronic Cash System”.
Bitcoin becomes what we make it. It serves the people we choose to build for. If we want Bitcoin to be a store of value or medium of exchange, we need to build the protocols and services that make this happen.
Sometimes it is more interesting to ask specifically, who are we building for? Are we building for Americans looking for a long-term investment? Are we building for a shop owner in Brazil? A dealer in Turkey? A software developer in Nigeria?
If we want bitcoin to be a medium of exchange, we need to focus on the users who need it most – and Taproot Assets is the tool for that job.
Tapioca assets
Taproot Assets allows us to take the assets and units of account that people want and need today as mediums of exchange – and move them to Bitcoin infrastructure on the Lightning Network.
From a technical perspective, Taproot Assets is a protocol that allows minting of assets on the Bitcoin blockchain in a very blockspace-efficient way using taproot transactions, enabled by the Taproot soft fork activation in November 2021. Client-side validation is used, the protocol is opt-in, and no consensus changes are required. Fungible assets are exchangeable on the Lightning Network and you can use this protocol on the mainnet today!
Taproot Assets is a flexible protocol that already opens the door to a wide range of use cases, but the core use is stablecoins on Lightning.
For those who want to learn more, here are the documents and tutorial and demo videos can be found here.
So why is this such a powerful tool for adoption?
Meet people where they are
It’s easy to get immersed in the world of Bitcoin – where we use bitcoin, talk about it constantly, and dive deep into all the things it solves. That passion and curiosity is powerful. But the real magic happens when we connect that world with people outside of it.
Most people don’t have time to study monetary theory or economic history. Leisure and disposable income are not the norm in the world. Stay humble. If we want Bitcoin to serve the world, let’s meet people where they are. And we can: We have the tools and skills to build things that are really useful – products that people love, not because they’re Bitcoin-powered, but because they solve real problems.
Adoption will not only come from our impressive understanding of Austrian economics, it will come from building things that are so useful that people can’t help but use them. The true measure is in the tool. The real goal is in the users. Number of people go up!
Stablecoins
And so let’s talk about stablecoins. Love them or question them, stablecoins have clearly found the product market fit. The invisible hand has spoken!
Let’s look at some numbers:
In Brazil, approximately 90% of crypto transactions are linked to stablecoins, primarily for payments and transfers.
Tether estimates it has 434 million users worldwide, who trade $31 billion USDT daily. About 13% of the total USDT supply is held by savers, who are likely emerging market users with no other access to dollars.
Tether (USDT) has a market cap of $153 billion and recorded over $10 trillion in total volume by 2024. USD Coin (USDC) follows with a market cap of $61 billion. (Numbers from CoinGecko at time of writing.)
Utilities
Why have the people chosen stablecoins? Utilities.
Most people around the world do not have the luxury of HODLing through a bear market. Most people don’t consider the intricacies of fractional reserve banking. They are busy living – busy being fathers, and mothers, and small business owners, and doctors, and carpenters, and farmers, teachers, and students. All the things that make the world go round.
Most people are simply looking for an improvement in their daily lives, and it’s our job, as money experts, to give them what they need.
They need stability and affordability.
Infrastructure adoption
As the Bitcoin adoption story goes, we first achieve store of value, then medium of exchange, then unit of account – the final boss! But if we facilitate stablecoins, are we preventing bitcoin from achieving a unit of account? No. Bitcoin will be a unit of account if and when the world needs it, if and when we make it available.
Those who choose to use a stablecoin on the Lightning Network will do so because it is the best option for them; it is the option that provides the most benefit. They are not thinking of “adopting Bitcoin” and they have no intention of adopting bitcoin, the unit of account. But they will adopt Bitcoin, the network. They will adopt Bitcoin, the payment infrastructure.
We often think about replacing the Visa network, and to do that we need to be more useful than Visa, which processes transactions in 175 different currencies.
Our Turkish dealer is an expert in what he does, not an expert in decentralized network technology. He will choose Lightning over Visa when it becomes the better, more affordable and easier way to run his business. And for many businesses, Lightning is already the faster and more affordable solution.
Let’s imagine the precoiner store owner in Brazil. She manages her business by making transactions using a stablecoin via a Taproot Assets Lightning wallet. She has switched to Bitcoin infrastructure. She was enticed to do so by a simple, easy-to-use mobile wallet that simplified her business, reduced her costs and reduced her risk. This wallet allows her to make instantly settled, global, incredibly affordable transactions and to do so in a wide variety of currencies. She came to use this medium of exchange, but is now one button away from losing her precoiner status.
And should the global fiat money collapse finally arrive on some random Tuesday afternoon, she just needs to press that button to switch out of fiat and into rate, because she’s already running on Bitcoin infrastructure.
A multi-asset network
The potential and utility of a Taproot Assets-enabled, multi-asset Lightning network is deeply underappreciated. Seriously: It’s a medium of exchange like the world has never seen before.
Application builders and their users can have any unit of account they like – US dollars, Brazilian reais, euros, etc. – and it’s all routed through Bitcoin. Taproot Assets Lightning transactions require Bitcoin liquidity. These transactions support and grow the Lightning Network and enable a multitude of opportunities. A payment can be sent out by Alice in USD, but Bob can receive BTC. Alice can send another payment in USD that will be routed through the Lightning Network, through the rate-denominated liquidity at the center of the Lightning Network, to Carol, who chooses to receive a Euro-denominated stablecoin.
Our Turkish retailer can sell items to our Brazilian store owner using a stablecoin. Not only can he interact with companies around the world without friction, but also any ordinary Bitcoiner can easily transact with either using rate. No need to touch that stablecoin if they don’t want to.
And it gets even cooler. Let’s imagine this scenario for a moment…
(https://x.com/MichaelLevin/status/1885402488955662448)
A global, scalable, instantly settled payment network that is meaningfully cheaper than Visa — a payment network that now allows users to transact in the currency of their choice. This is the brilliance of building with Bitcoin as infrastructure – people adopt the network before they even know it’s Bitcoin.
Conclusion
If we want to see Bitcoin as a medium of exchange, if that’s what we’re building for, it’s our job as experts to give people what they clearly tell us they need: instant transactions with low fees and stable value. In other words, multi-active Lightning.
Now of course Taproot Assets is a versatile protocol. It can and will be used for all sorts of things – including use cases that appeal to the American crowd that sees bitcoin primarily as a long-term investment. Yay, permission-free innovation! With this protocol, we help usher Bitcoin into its media era.
This piece is an article in the latest print edition of Bitcoin Magazine, The Lightning Issue. We share it here to show the ideas explored throughout the issue.