As a researcher with a background in blockchain technology and digital currencies, I find the recent developments surrounding stablecoins on Bitcoin to be an exciting and significant step forward for the industry. Elizabeth Stark, CEO of Lightning Labs, has made an impressive case for why Bitcoin is an ideal platform for stablecoins and other tokenized assets.
Through the latest Taproot upgrade implemented at the end of 2021, Lightning Labs has introduced new functionalities that bring stablecoins operating on Bitcoin a step closer to materialization.
At FT Live’s Crypto and Digital Assets summit in London, Elizabeth Stark, the CEO of Lightning Labs, explained the recent advancements from her Bitcoin development company.
The co-founder of the company articulately explained the concepts of Bitcoin and the Lightning Network to a group of individuals from the conventional finance industry.
Lightning Labs’ Taproot Asset protocol, led by Stark, is making strides in enabling Bitcoin to support stablecoins and tokenized assets. Developers have advanced substantially in this direction, reaching a milestone with the recent testing of related transactions on the Lightning network.
“We released an early part of the code in October and recently demoed the first-ever transaction on Lightning of an asset. The idea is to have crypto dollars and stablecoins on the Bitcoin blockchain.”
Stark pointed out that historically, digital assets have functioned on various other blockchains, which have been plagued with high transaction fees and other complications. She believes that Bitcoin’s network may be the optimal choice for utilizing stablecoins due to its “unmatched security and decentralization.”
Bitcoin and stablecoins value as a store of value
In his continuation of the conversation, Stark expounded on the benefits of Bitcoin (BTC) and stablecoins as valuable assets, particularly relevant for countries dealing with inflation crises and weakening fiat currencies.
The CEO of Lightning Labs noted a significant surge in the usage of stablecoins following the onset of the COVID-19 pandemic, predominantly among users in developing countries.
As a researcher, I’ve found that the most dedicated users are those seeking a reliable store of value. Some of them prefer using Bitcoin for this purpose, while others opt for stablecoins. In certain instances, they even make use of both options.
The two largest stablecoin players, Tether (USDT) and Circle (USDC), hold more United States Treasury bonds combined than major nations like Germany and South Korea. Stark said this is an intriguing fact given that end users don’t benefit from the interest from holding stablecoins.
In nations facing hyperinflation or uncertain economic conditions, people are drawn to stablecoins as they offer a reliable means of preserving value.
Lightning-powered stablecoins will be superior
Due to the surging worth of stablecoins, Stark emphasized the importance of developing the necessary framework for generating stablecoins and real-world assets directly on the Bitcoin blockchain.
I’m currently involved in developing this particular protocol and technology. The significance lies not in us directly issuing assets, but rather in creating the foundation or “rails” for others to do so. Real-world tokenized assets will be the end product, with asset issuers utilizing our technology to bring these digital representations of value into existence.
The CEO proposed that financial institutions have the ability to create and transfer gold assets, stablecoins, and other assets pegged to fiat currency over the Lightning Network using Bitcoin as collateral.
As an analyst, I found Stark’s emphasis on the comparative affordability of his proposed solution particularly noteworthy. He contrasted the costs associated with using StarkNet against those of other blockchain networks and traditional financial systems.
“If you look at Visa where fees in the U.S. can be upward of 3%, or even or 1% the fees, transacting with stablecoins on Lightning can be dramatically lower, a cent or less than that.”
I discovered that this innovation could potentially allow individuals to carry out international transactions at significantly reduced costs compared to the conventional methods.
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2024-05-09 13:45