Taproot Assets – Bitcoin As A Medium Of Exchange

What is Bitcoin and who is it for? There are a large number of catchphrases available on Twitter to cover this phrase. Bitcoin is available to everyone… Don’t wait, it is available to anyone! Bitcoin is a store of value. Bitcoin is a medium of exchange. We could classically 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 must build protocols and services that make that happen.

Sometimes it’s 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 store owner in Brazil? Distributor in Türkiye? 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 mission.

Root assets

Taproot Assets allows us to take the assets and units of account that people want and need today as a means of exchange – and move them to the Bitcoin infrastructure on the accelerator network.

From a technical perspective, Taproot Assets is a protocol that allows assets to be minted on the Bitcoin blockchain in a very block space efficient way using Taproot transactions, which was made possible thanks to the activation of the Taproot soft fork in November 2021. Client-side verification is used, the protocol is subscribed, and no changes are required Unanimously. Fungible assets are fungible on the Lightning Network, and you can use this protocol on the mainnet today!

Taproot Assets is a flexible protocol that really opens the door to a wide range of use cases, but the primary use case is stablecoins on Lightning.

For those who want to know more, here DocumentsTutorial and demonstration videos can be found here.

So, why is it such a powerful tool for adoption?

Meet people where they are

It’s easy to get immersed in the world of Bitcoin – we use Bitcoin, talk about it constantly, and delve into all the things that are being fixed. This passion and curiosity is powerful. But real magic happens when we connect this world with people outside of it.

Most people do not have the time to study monetary theory or economic history. Free time and disposable income are not the norm in the world. Be 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 truly useful things – products that people love not because they are backed by Bitcoin, but because they solve real problems.

Adoption will come not only from our impressive understanding of Austrian economics, but from building extremely useful things that people can’t help but use. The true measure is the benefit. The true measure is in the users. number Of people Go up!

Stablecoins

So let’s talk about stablecoins. Like it or doubt it, it is clear that stablecoins have found their product market fit. The invisible hand has spoken!

Let’s look at some numbers:

In Brazil, approximately 90% of cryptocurrency transactions are linked to stablecoins, primarily for payments and remittances.

Tether estimates it has 434 million users worldwide, transacting US$31 billion daily. About 13% of the total USDT supply is held by savers who are likely users in emerging markets without access to the dollar.

Tether (USDT) has a market cap of US$153 billion and has recorded a total volume of over US$10 trillion in 2024. It is followed by USD Coin (USDC) with a market capitalization of US$61 billion. (Figures from CoinGecko at time of writing.)

Feasibility

Why do people choose stablecoins? Feasibility.

Most people around the world don’t have the luxury of HODLing through a bear market. Most humans don’t think about the complexities of fractional reserve banking. They are busy with life, busy being parents, small business owners, doctors, carpenters, farmers, teachers and students. All the things that make the world go round.

Most people are simply seeking to improve their daily lives, and it is our job, as money experts, to give them what they need.

They need stability and affordability.

Infrastructure adoption

According to the Bitcoin adoption story, we first achieve a store of value, then a medium of exchange, then a unit of account – the final boss! But if we facilitate stablecoins, are we preventing Bitcoin from achieving unit of account? No, Bitcoin will be a unit of account if and when the world needs it, and 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 brings the most benefit. They are not considering “adopting Bitcoin,” nor do they intend to adopt Bitcoin, the unit of account. But they will adopt the Bitcoin network. They will adopt Bitcoin, the payments infrastructure.

We often think about replacing the Visa network, and to do that we have to be more useful than Visa, which processes transactions in 175 different currencies.

Our Turkish distributor is an expert at what they do, not an expert in decentralized network technology. He will choose Lightning over Visa when it becomes the better, more affordable and easier option to run his business. For many companies, Lightning is already the fastest and most affordable option.

Let’s imagine that the owner of a pre-currency store in Brazil. It runs its businesses and conducts transactions using stablecoin via the Taproot Assets Lightning wallet. It has switched to Bitcoin infrastructure. She was tempted to do this with a simple, easy-to-use mobile wallet that streamlined her business, lowered her costs and reduced her risks. This wallet allows it to perform global transactions and settlement instantly and at incredibly affordable prices, and to do so in a wide range of currencies. It came to take advantage of this medium of exchange, but is now one button away from losing its pre-currency status.

And if the global fiat money collapse finally happened on a random Tuesday afternoon, it would only need to press that button to switch from fiat to SAT because it’s already running on the Bitcoin infrastructure.

Multi-asset network

The potential and utility of the multi-asset Lightning Network powering Taproot assets is underappreciated. Seriously: it’s a means of exchange the world has never seen before.

App creators and their users can have any unit of account they want — US dollars, Brazilian reals, euros, etc. — and it’s all routed through Bitcoin. Taproot Assets Lightning transactions require Bitcoin liquidity. These transactions support and grow the accelerated network and enable a plethora of options. Alice can send a payment in USD, but Bob can receive Bitcoin. Alice can send another payment in USD which will be routed through the Lightning Network, through the sats-denominated liquidity in the middle of the Lightning Network, to Carol who chooses to have a Euro-denominated stablecoin.

Our Turkish distributor can sell goods to our Brazilian store owner using stablecoin. Not only can it interact with businesses around the world without friction, but any regular Bitcoin user can transact with either using satellite, seamlessly. There is 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, instant settlement, and much cheaper than Visa – a payment network that now gives users the option to transact in any currency they prefer. That’s the brilliance of building with Bitcoin as infrastructure – people are adopting the network before they even know it’s Bitcoin.

conclusion

If we want to see Bitcoin as a medium of exchange, and if that is what we are building for, then it is our job as experts to give people what they clearly tell us they need: instant, low-fee transactions and stable value. In other words, Lightning is multi-asset.

Now, of course Taproot Assets is a very versatile protocol. It can be used for all sorts of things, including use cases that appeal to an American audience that sees Bitcoin primarily as a long-term investment. Yay, innovation not allowed! Through this protocol, we are helping bring Bitcoin into the era of exchange.

This article is an article that appeared in the latest print edition of Bitcoin Magazine, The Lightning Issue. We’re sharing them here to show the ideas explored throughout the full release.