Crypto
It Is Time to Re-Found the American Republic
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An Era of Democratic Revolutions
In the early 1980s, my parents immigrated to the United States from communist Poland. Both software engineers, they saw in the U.S. a place where they could build the future and prosper without the oppression of a government that doled out favors based on Party membership and meted out punishments for political dissent.
They had both been active in the Solidarity movement, a movement which brought Polish society together to topple the communist regime in 1989. “Solidarity” began as a workers’ strike and grew to encompass the political left, right and center; the Catholic Church as well as leading Jewish and other religious and non-religious intellectuals and activists. Solidarity brought together the entire society in the cause of self-determination; the right of a people to govern themselves, free of tyranny and foreign interference.
Only one year before, Chileans had come together en masse to oppose the continued reign of dictator Augusto Pinochet. Eighteen parties across the political spectrum, many of whom previously would not speak to each other, rallied the public to vote “no” on extending Pinochet’s presidency for another eight years. The Chilean Supreme Court even mandated that Pinochet adhere to his own Constitution’s guidelines for the fairness of the referendum, a rare check on his power that signaled to the public that a new space was opening for democratic contestation. Indeed, Pinochet decisively lost the referendum, ushering in a new era of hope and prosperity for Chile.
In 1990, Zambian President Kenneth Kaunda recognized the writing on the wall; decades of economic stagnation and single-party rule had led to days of rioting and a coup attempt. Kaunda attempted to appease the people by announcing a referendum on whether to legalize other parties, but soon he realized this was not enough. Feeling the pressure, he recommended constitutional amendments legalizing multiple parties; these were approved unanimously by the Zambian parliament. Kaunda also called a snap general election for the following year, which he roundly lost to Frederick Chiluba, the leader of the new Movement for Multi-party Democracy (MMD).
Poland, Chile, and Zambia are only a few examples of the “wave of democratization” that swept the world in the late 1980s and early 1990s. While the word “democracy” has many meanings, in this era of revolutions, it has largely meant the establishment of procedures for ensuring the peaceful transfer of power to new leadership selected by relatively fair and contested elections within a nation with widespread suffrage. The geopolitical conditions of this decade (~1985-1995) created a rare opening for such reforms in many countries; the weakening and fall of the Soviet Union combined with the United States’ pullback of support from some anti-communist dictatorships and the IMF and World Bank’s increasing tendency to make loans conditional on some degree of democratization.
While many countries across Eastern Europe, Africa and Latin America have since experienced reversals of this democratizing trend, the events surrounding the end of the Cold War nevertheless demonstrated that the desire to influence the political future of one’s society is universal and cannot be easily suppressed. Many of these young democracies looked to the United States as an exemplar, aspiring to be like the country that U.S. President Ronald Reagan had called “a shining city upon a hill”.
The Rise of Authoritarian Empires
On the same day that Poland held its first free election since the 1920s — June 4, 1989 — the Chinese government sent in approximately 300,000 troops to pacify a protest in and around Tiananmen Square in Beijing. Roughly a million people had been engaged in marches, hunger strikes and sit-ins since April to protest systematic corruption, growing inequality, lack of free speech and association, and negative coverage of student political activism by state-run media. The government finally declared martial law and cleared the square, completing its operations on June 4. Hundreds, if not thousands, of demonstrators were killed, and many were subsequently executed, imprisoned or disappeared. The day after the crackdown, the world was riveted by images of “Tank Man”, a lone protester staring down a column of tanks leaving the square. The identity of this man was never publicly confirmed, but he instantly became a globally recognized symbol of the fight for freedom against state repression.
While the events of June 4 rallied global public opinion in support of Chinese pro-democracy activists, this had virtually no effect in moving China toward a more democratic system of government. In fact, since the events in Tiananmen Square, China has served as perhaps the world’s most prominent example of the fact that economic prosperity does not require democracy. Since 1989, China has averaged annual GDP growth of over 9%, among the world’s highest, and it is unquestionably the world’s leading exporter. Between 1990 and 2015, China lifted nearly 750 million people out of extreme poverty — that translates to 66% of the world’s extremely poor population moving to a higher socioeconomic status.
Measuring public opinion in China is notoriously tricky, as foreign polling firms are banned and residents are reluctant to share their genuine feelings about their government. Nevertheless, a steadily improving standard of living is one of the most reliable indicators of government support. It is unsurprising, therefore, that the Chinese government prioritizes economic growth (and, implicitly, combating inequality) as a primary driver of its own legitimacy. In order to keep the economic good news front and center, and to suppress any bad news or conflicting narratives, the regime also enforces some of the most stringent media regulations in the world, using a combination of censorship, lawsuits, arrests and other intimidation tactics.
China’s growing economic prosperity has translated into greater geopolitical power. China is building its own alternative to SWIFT, a U.S.-led banking communications network which frequently censors financial transactions to and from Chinese banks and individuals. The country has also partnered with Russia, India and Brazil to create a new, commodity-backed, basket-based reserve asset to rival the International Monetary Fund’s SDR (“special drawing rights”). In addition, the Chinese Communist Party has recently instructed Party members to divest themselves of foreign asset holdings, and the Chinese central bank has begun to systematically taper its purchases of U.S. Treasuries. China has partnered with Russia to execute a manned mission to Mars by 2033, years before the United States will have that capability, and has made it explicit that the United States’ involvement in the Pacific region is not welcome.
China’s close partnership with Russia is no accident; they are both global-scale imperial forces who share a continent, and so they have a long history of cooperation. While the fall of the Soviet Union temporarily destabilized that incarnation of the Russian empire, the reborn Russian Federation under President Vladimir Putin has been busy recapturing and building upon its historical influence across the region. Domestically, Putin consolidated power by establishing himself as a key stakeholder in all major industrial activity in the country; by increasingly channeling funds from regional provinces to the capital; and by demoting, intimidating and even murdering political opponents and dissidents. Whether or not he personally receives kickbacks is a subject of debate. While Putin has not been able to deliver the type of economic growth and improvement in living standards that the citizens of China have come to expect, he nevertheless is seen by many Russians as restoring the strength of the ruble, and the power and dignity of the Russian empire on the world stage through a skillfully executed, Russia-first foreign policy.
Russian support managed to keep Syrian dictator Bashar al-Assad in power throughout a brutal civil war that began in 2011. This represented a key defeat for the United States, who backed the rebels. Many of these insurgents, particularly in the early days, genuinely fought for liberal democracy, but as the conflict dragged on and political moderates were killed, they were increasingly replaced by members of religious extremist groups like ISIS — whom the United States had been fighting in Iraq and Afghanistan. The Syria quagmire was an expensive foreign policy defeat whose unclear goals and strategy created division within the United States.
With Russia’s annexation of Ukrainian Crimea in 2014 and the full-scale invasion of Ukraine in 2022, Putin has bet on the fact that Russia’s commodity power and nuclear capabilities will deter other countries from engaging with its military directly. Indeed, so far, the U.S. and EU have only provided indirect military support for Ukraine; the actual war has been waged on economic grounds. In response to the invasion, the United States took the unprecedented step of freezing Russia’s foreign reserve assets; this led Putin to redirect exports of Russian oil and gas away from Europe and the U.S. to India, China and other countries while insisting on payment for these and other Russian commodities in rubles. This weakened the petrodollar system and created an energy shortage in Europe that is accelerating the brewing sovereign debt crisis and sowing political instability across the continent.
In short, Russia and China are demonstrating that their power offers a material counterweight to the global influence of the United States. The success of Russia and China, both openly authoritarian empires, on the world stage is calling into question whether political liberty — ostensibly a hallmark of the American project — bears any relationship with economic prosperity, national security and global pre-eminence.
Since the Cold War, Russia and the United States have been engaged in a mutual practice of sowing disinformation and social conflict in one another’s countries. Over the past decade, this practice has come to a head, with Russian political interference becoming a flashpoint issue in the 2016 and 2020 U.S. presidential elections. Indeed, 2016 was the first time many Americans realized that other countries may try to influence the outcomes of our own elections, just as we routinely attempt to influence elections in foreign countries. Despite countless investigations, committees and reports, however, the U.S. government has not been able to produce a shared record of truth about the nature of Russian involvement with American politics that is accepted by members of both major parties and the U.S. public at large.
But Russian interference could only be effective at polarizing a country if a growing ideological chasm on issues from the economy and class inequality to gender identity and race relations had not already made the establishment of a shared reality — or even shared terms of debate — extraordinarily difficult. This fragmentation of U.S. political consensus places the country in a vulnerable position: it has called into question the essence of what it means to be an American. This is a crisis of meaning which has rendered inherited cultural narratives, particularly as represented by the two leading American political parties, hollow and unappealing, especially for younger generations. And as history has shown, an easy way for authoritarians to take power is to sow division and discord among a people.
In response to the current incoherence of the American project, some have concluded that it is not worth defending; instead, they have decided to focus on their own peace and prosperity in whatever jurisdiction is most amenable. Others have responded to the crisis of meaning by gravitating toward seemingly random, but in fact highly motivated, acts of violence that produce temporary feelings of power and relevance — as witnessed in the steady rise in mass shootings over the past several decades. Still others have entrenched themselves firmly in one or another partisan camp, believing that the only thing standing between themselves or their country and nihilistic implosion is the next electoral victory. Finally, a vast contingent of Americans is simply trying to ride out the storm, keeping their heads down and doing their best to survive.
We must do better than that as individuals, and as a country. We must re-found the American republic by re-imagining our institutions in line with the principles of liberty, equality and justice on which this country was founded. Only in this way can we offer a viable alternative to the model of civic life proposed by today’s rising authoritarian empires and the countries that follow their lead.
To be American means to stand for “liberty, not dominion,” in the words of our sixth President, John Quincy Adams. This means that Americans prioritize individual freedom and peaceful self-sovereignty over imperial power — over the projection of power over other countries and peoples. In 1821, before Adams was President but during his tenure as Secretary of State, he asked (and answered) the question; “What has America done for the benefit of mankind?”
“Let our answer be this: America, with the same voice which spoke herself into existence as a nation, proclaimed to mankind the inextinguishable rights of human nature, and the only lawful foundations of government. America, in the assembly of nations, since her admission among them, has invariably, though often fruitlessly, held forth to them the hand of honest friendship, of equal freedom, of generous reciprocity. She has uniformly spoken among them, though often to heedless and often to disdainful ears, the language of equal liberty, of equal justice, and of equal rights. She has, in the lapse of nearly half a century, without a single exception, respected the independence of other nations while asserting and maintaining her own. […]
But she goes not abroad, in search of monsters to destroy. She is the well-wisher to the freedom and independence of all. She is the champion and vindicator only of her own. She will commend the general cause by the countenance of her voice, and the benignant sympathy of her example. She well knows that by once enlisting under other banners than her own, were they even the banners of foreign independence, she would involve herself beyond the power of extrication, in all the wars of interest and intrigue, of individual avarice, envy, and ambition, which assume the colors and usurp the standard of freedom. The fundamental maxims of her policy would insensibly change from liberty to force. […] She might become the dictatress of the world. She would be no longer the ruler of her own spirit. […]
[America’s] glory is not dominion, but liberty. Her march is the march of the mind. She has a spear and a shield: but the motto upon her shield is, Freedom, Independence, Peace. This has been her Declaration: this has been, as far as her necessary intercourse with the rest of mankind would permit, her practice.”
This is an American project worth defending. It focuses above all on being American — on cultivating the virtues of friendship, freedom, generosity, reciprocity, equality, liberty and justice. Being American means having a certain kind of character — it means living one’s values. This is both much harder and much easier than being a global empire, with hands and interests in every conflict and a demand that other countries submit to our interests.
After our victory against the Axis powers alongside the Soviet Union in World War II, the United States became a global empire on a historically unprecedented scale. This led us to do the opposite of what Adams exhorted; we overextended ourselves militarily, economically, and politically in a way that undermined the traditions of liberty, friendship and generosity that guided our character as a people. We have ballooned our national debt and destroyed millions of well-paying jobs, progressively impoverished our people and sowed domestic unrest. In our foreign policy, we have often behaved in ways utterly inconsistent with our founding values. This has disillusioned generations of young Americans who believed in their country and wanted to serve it only to discover that their government’s actions did not conform to its stated ideals. Psychologists call this “moral injury”, a kind of psychological trauma experienced as a profound personal violation akin to rape or assault.
In order to re-found America, we must remember who we are. America and Americans stand for liberty, not dominion. This call for re-founding is therefore a calling for us to become better people — and for others, whose autonomy and independence we respect, to become better as well, on their own terms. Americans will lead by example, not by force. In this way, we can again uplift our own people and transform the world.
The only question is; are we the people who can do it?
El Salvador’s Minister of the Economy Maria Luisa Hayem Brevé submitted a digital assets issuance bill to the country’s legislative assembly, paving the way for the launch of its bitcoin-backed “volcano” bonds.
First announced one year ago today, the pioneering initiative seeks to attract capital and investors to El Salvador. It was revealed at the time the plans to issue $1 billion in bonds on the Liquid Network, a federated Bitcoin sidechain, with the proceedings of the bonds being split between a $500 million direct allocation to bitcoin and an investment of the same amount in building out energy and bitcoin mining infrastructure in the region.
A sidechain is an independent blockchain that runs parallel to another blockchain, allowing for tokens from that blockchain to be used securely in the sidechain while abiding by a different set of rules, performance requirements, and security mechanisms. Liquid is a sidechain of Bitcoin that allows bitcoin to flow between the Liquid and Bitcoin networks with a two-way peg. A representation of bitcoin used in the Liquid network is referred to as L-BTC. Its verifiably equivalent amount of BTC is managed and secured by the network’s members, called functionaries.
“Digital securities law will enable El Salvador to be the financial center of central and south America,” wrote Paolo Ardoino, CTO of cryptocurrency exchange Bitfinex, on Twitter.
Bitfinex is set to be granted a license in order to be able to process and list the bond issuance in El Salvador.
The bonds will pay a 6.5% yield and enable fast-tracked citizenship for investors. The government will share half the additional gains with investors as a Bitcoin Dividend once the original $500 million has been monetized. These dividends will be dispersed annually using Blockstream’s asset management platform.
The act of submitting the bill, which was hinted at earlier this year, kickstarts the first major milestone before the bonds can see the light of day. The next is getting it approved, which is expected to happen before Christmas, a source close to President Nayib Bukele told Bitcoin Magazine. The bill was submitted on November 17 and presented to the country’s Congress today. It is embedded in full below.
This is an opinion editorial by Joakim Book, a Research Fellow at the American Institute for Economic Research, contributor and copy editor for Bitcoin Magazine and a writer on all things money and financial history.
I don’t.
That’s it. That’s the article.
In all sincerity, that is the full message: Just don’t do it. It’s not worth it.
You’re not an excited teenager anymore, in desperate need of bragging credits or trying out your newfound wisdom. You’re not a preaching priestess with lost souls to save right before some imminent arrival of the day of reckoning. We have time.
Instead: just leave people alone. Seriously. They came to Thanksgiving dinner to relax and rejoice with family, laugh, tell stories and zone out for a day — not to be ambushed with what to them will sound like a deranged rant in some obscure topic they couldn’t care less about. Even if it’s the monetary system, which nobody understands anyway.
Get real.
If you’re not convinced of this Dale Carnegie-esque social approach, and you still naively think that your meager words in between bites can change anybody’s view on anything, here are some more serious reasons for why you don’t talk to friends and family about Bitcoin the protocol — but most certainly not bitcoin, the asset:
- Your family and friends don’t want to hear it. Move on.
- For op-sec reasons, you don’t want to draw unnecessary attention to the fact that you probably have a decent bitcoin stack. Hopefully, family and close friends should be safe enough to confide in, but people talk and that gossip can only hurt you.
- People find bitcoin interesting only when they’re ready to; everyone gets the price they deserve. Like Gigi says in “21 Lessons:”
“Bitcoin will be understood by you as soon as you are ready, and I also believe that the first fractions of a bitcoin will find you as soon as you are ready to receive them. In essence, everyone will get ₿itcoin at exactly the right time.”
It’s highly unlikely that your uncle or mother-in-law just happens to be at that stage, just when you’re about to sit down for dinner.
- Unless you can claim youth, old age or extreme poverty, there are very few people who genuinely haven’t heard of bitcoin. That means your evangelizing wouldn’t be preaching to lost, ignorant souls ready to be saved but the tired, huddled and jaded masses who could care less about the discovery that will change their societies more than the internal combustion engine, internet and Big Government combined. Big deal.
- What is the case, however, is that everyone in your prospective audience has already had a couple of touchpoints and rejected bitcoin for this or that standard FUD. It’s a scam; seems weird; it’s dead; let’s trust the central bankers, who have our best interest at heart.
No amount of FUD busting changes that impression, because nobody holds uninformed and fringe convictions for rational reasons, reasons that can be flipped by your enthusiastic arguments in-between wiping off cranberry sauce and grabbing another turkey slice. - It really is bad form to talk about money — and bitcoin is the best money there is. Be classy.
Now, I’m not saying to never ever talk about Bitcoin. We love to talk Bitcoin — that’s why we go to meetups, join Twitter Spaces, write, code, run nodes, listen to podcasts, attend conferences. People there get something about this monetary rebellion and have opted in to be part of it. Your unsuspecting family members have not; ambushing them with the wonders of multisig, the magically fast Lightning transactions or how they too really need to get on this hype train, like, yesterday, is unlikely to go down well.
However, if in the post-dinner lull on the porch someone comes to you one-on-one, whisky in hand and of an inquisitive mind, that’s a very different story. That’s personal rather than public, and it’s without the time constraints that so usually trouble us. It involves clarifying questions or doubts for somebody who is both expressively curious about the topic and available for the talk. That’s rare — cherish it, and nurture it.
Last year I wrote something about the proper role of political conversations in social settings. Since November was also election month, it’s appropriate to cite here:
“Politics, I’m starting to believe, best belongs in the closet — rebranded and brought out for the specific occasion. Or perhaps the bedroom, with those you most trust, love, and respect. Not in public, not with strangers, not with friends, and most certainly not with other people in your community. Purge it from your being as much as you possibly could, and refuse to let political issues invade the areas of our lives that we cherish; politics and political disagreements don’t belong there, and our lives are too important to let them be ruled by (mostly contrived) political disagreements.”
If anything, those words seem more true today than they even did then. And I posit to you that the same applies for bitcoin.
Everyone has some sort of impression or opinion of bitcoin — and most of them are plain wrong. But there’s nothing people love more than a savior in white armor, riding in to dispel their errors about some thing they are freshly out of fucks for. Just like politics, nobody really cares.
Leave them alone. They will find bitcoin in their own time, just like all of us did.
This is a guest post by Joakim Book. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
This is an opinion editorial by Federico Tenga, a long time contributor to Bitcoin projects with experience as start-up founder, consultant and educator.
The term “smart contracts” predates the invention of the blockchain and Bitcoin itself. Its first mention is in a 1994 article by Nick Szabo, who defined smart contracts as a “computerized transaction protocol that executes the terms of a contract.” While by this definition Bitcoin, thanks to its scripting language, supported smart contracts from the very first block, the term was popularized only later by Ethereum promoters, who twisted the original definition as “code that is redundantly executed by all nodes in a global consensus network”
While delegating code execution to a global consensus network has advantages (e.g. it is easy to deploy unowed contracts, such as the popularly automated market makers), this design has one major flaw: lack of scalability (and privacy). If every node in a network must redundantly run the same code, the amount of code that can actually be executed without excessively increasing the cost of running a node (and thus preserving decentralization) remains scarce, meaning that only a small number of contracts can be executed.
But what if we could design a system where the terms of the contract are executed and validated only by the parties involved, rather than by all members of the network? Let us imagine the example of a company that wants to issue shares. Instead of publishing the issuance contract publicly on a global ledger and using that ledger to track all future transfers of ownership, it could simply issue the shares privately and pass to the buyers the right to further transfer them. Then, the right to transfer ownership can be passed on to each new owner as if it were an amendment to the original issuance contract. In this way, each owner can independently verify that the shares he or she received are genuine by reading the original contract and validating that all the history of amendments that moved the shares conform to the rules set forth in the original contract.
This is actually nothing new, it is indeed the same mechanism that was used to transfer property before public registers became popular. In the U.K., for example, it was not compulsory to register a property when its ownership was transferred until the ‘90s. This means that still today over 15% of land in England and Wales is unregistered. If you are buying an unregistered property, instead of checking on a registry if the seller is the true owner, you would have to verify an unbroken chain of ownership going back at least 15 years (a period considered long enough to assume that the seller has sufficient title to the property). In doing so, you must ensure that any transfer of ownership has been carried out correctly and that any mortgages used for previous transactions have been paid off in full. This model has the advantage of improved privacy over ownership, and you do not have to rely on the maintainer of the public land register. On the other hand, it makes the verification of the seller’s ownership much more complicated for the buyer.
Source: Title deed of unregistered real estate propriety
How can the transfer of unregistered properties be improved? First of all, by making it a digitized process. If there is code that can be run by a computer to verify that all the history of ownership transfers is in compliance with the original contract rules, buying and selling becomes much faster and cheaper.
Secondly, to avoid the risk of the seller double-spending their asset, a system of proof of publication must be implemented. For example, we could implement a rule that every transfer of ownership must be committed on a predefined spot of a well-known newspaper (e.g. put the hash of the transfer of ownership in the upper-right corner of the first page of the New York Times). Since you cannot place the hash of a transfer in the same place twice, this prevents double-spending attempts. However, using a famous newspaper for this purpose has some disadvantages:
- You have to buy a lot of newspapers for the verification process. Not very practical.
- Each contract needs its own space in the newspaper. Not very scalable.
- The newspaper editor can easily censor or, even worse, simulate double-spending by putting a random hash in your slot, making any potential buyer of your asset think it has been sold before, and discouraging them from buying it. Not very trustless.
For these reasons, a better place to post proof of ownership transfers needs to be found. And what better option than the Bitcoin blockchain, an already established trusted public ledger with strong incentives to keep it censorship-resistant and decentralized?
If we use Bitcoin, we should not specify a fixed place in the block where the commitment to transfer ownership must occur (e.g. in the first transaction) because, just like with the editor of the New York Times, the miner could mess with it. A better approach is to place the commitment in a predefined Bitcoin transaction, more specifically in a transaction that originates from an unspent transaction output (UTXO) to which the ownership of the asset to be issued is linked. The link between an asset and a bitcoin UTXO can occur either in the contract that issues the asset or in a subsequent transfer of ownership, each time making the target UTXO the controller of the transferred asset. In this way, we have clearly defined where the obligation to transfer ownership should be (i.e in the Bitcoin transaction originating from a particular UTXO). Anyone running a Bitcoin node can independently verify the commitments and neither the miners nor any other entity are able to censor or interfere with the asset transfer in any way.
Since on the Bitcoin blockchain we only publish a commitment of an ownership transfer, not the content of the transfer itself, the seller needs a dedicated communication channel to provide the buyer with all the proofs that the ownership transfer is valid. This could be done in a number of ways, potentially even by printing out the proofs and shipping them with a carrier pigeon, which, while a bit impractical, would still do the job. But the best option to avoid the censorship and privacy violations is establish a direct peer-to-peer encrypted communication, which compared to the pigeons also has the advantage of being easy to integrate with a software to verify the proofs received from the counterparty.
This model just described for client-side validated contracts and ownership transfers is exactly what has been implemented with the RGB protocol. With RGB, it is possible to create a contract that defines rights, assigns them to one or more existing bitcoin UTXO and specifies how their ownership can be transferred. The contract can be created starting from a template, called a “schema,” in which the creator of the contract only adjusts the parameters and ownership rights, as is done with traditional legal contracts. Currently, there are two types of schemas in RGB: one for issuing fungible tokens (RGB20) and a second for issuing collectibles (RGB21), but in the future, more schemas can be developed by anyone in a permissionless fashion without requiring changes at the protocol level.
To use a more practical example, an issuer of fungible assets (e.g. company shares, stablecoins, etc.) can use the RGB20 schema template and create a contract defining how many tokens it will issue, the name of the asset and some additional metadata associated with it. It can then define which bitcoin UTXO has the right to transfer ownership of the created tokens and assign other rights to other UTXOs, such as the right to make a secondary issuance or to renominate the asset. Each client receiving tokens created by this contract will be able to verify the content of the Genesis contract and validate that any transfer of ownership in the history of the token received has complied with the rules set out therein.
So what can we do with RGB in practice today? First and foremost, it enables the issuance and the transfer of tokenized assets with better scalability and privacy compared to any existing alternative. On the privacy side, RGB benefits from the fact that all transfer-related data is kept client-side, so a blockchain observer cannot extract any information about the user’s financial activities (it is not even possible to distinguish a bitcoin transaction containing an RGB commitment from a regular one), moreover, the receiver shares with the sender only blinded UTXO (i. e. the hash of the concatenation between the UTXO in which she wish to receive the assets and a random number) instead of the UTXO itself, so it is not possible for the payer to monitor future activities of the receiver. To further increase the privacy of users, RGB also adopts the bulletproof cryptographic mechanism to hide the amounts in the history of asset transfers, so that even future owners of assets have an obfuscated view of the financial behavior of previous holders.
In terms of scalability, RGB offers some advantages as well. First of all, most of the data is kept off-chain, as the blockchain is only used as a commitment layer, reducing the fees that need to be paid and meaning that each client only validates the transfers it is interested in instead of all the activity of a global network. Since an RGB transfer still requires a Bitcoin transaction, the fee saving may seem minimal, but when you start introducing transaction batching they can quickly become massive. Indeed, it is possible to transfer all the tokens (or, more generally, “rights”) associated with a UTXO towards an arbitrary amount of recipients with a single commitment in a single bitcoin transaction. Let’s assume you are a service provider making payouts to several users at once. With RGB, you can commit in a single Bitcoin transaction thousands of transfers to thousands of users requesting different types of assets, making the marginal cost of each single payout absolutely negligible.
Another fee-saving mechanism for issuers of low value assets is that in RGB the issuance of an asset does not require paying fees. This happens because the creation of an issuance contract does not need to be committed on the blockchain. A contract simply defines to which already existing UTXO the newly issued assets will be allocated to. So if you are an artist interested in creating collectible tokens, you can issue as many as you want for free and then only pay the bitcoin transaction fee when a buyer shows up and requests the token to be assigned to their UTXO.
Furthermore, because RGB is built on top of bitcoin transactions, it is also compatible with the Lightning Network. While it is not yet implemented at the time of writing, it will be possible to create asset-specific Lightning channels and route payments through them, similar to how it works with normal Lightning transactions.
Conclusion
RGB is a groundbreaking innovation that opens up to new use cases using a completely new paradigm, but which tools are available to use it? If you want to experiment with the core of the technology itself, you should directly try out the RGB node. If you want to build applications on top of RGB without having to deep dive into the complexity of the protocol, you can use the rgb-lib library, which provides a simple interface for developers. If you just want to try to issue and transfer assets, you can play with Iris Wallet for Android, whose code is also open source on GitHub. If you just want to learn more about RGB you can check out this list of resources.
This is a guest post by Federico Tenga. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
