Key Points
- Lightning Labs is developing functionality to bring stablecoins and tokenized assets to Bitcoin.
- Stablecoin adoption has grown significantly since the COVID-19 pandemic, particularly in emerging markets.
Elizabeth Stark, the CEO of Lightning Labs, recently revealed that the company is working on introducing stablecoins to the Bitcoin network. This announcement was made at the Crypto and Digital Assets summit in London, hosted by FT Live.
Taproot Assets Protocol
The Taproot Assets protocol is the tool Lightning Labs is using to make this possible. Stark shared that the developers have made considerable progress, even demonstrating the first-ever transaction of an asset on Lightning. The ultimate goal is to enable transactions of crypto dollars and stablecoins on the Bitcoin blockchain.
Stark believes that Bitcoin’s network is the most secure and decentralized, making it an ideal platform for stablecoins. These digital assets have traditionally been hosted on other blockchains, which have been plagued by high fees and other issues.
Bitcoin and Stablecoins as a Store of Value
Stark also discussed the value of Bitcoin and stablecoins as a store of value. This is particularly relevant in countries facing inflation and currency devaluation. Since the start of the COVID-19 pandemic, stablecoin adoption has surged, especially in emerging markets.
Stark pointed out that the top two stablecoin players, Tether (USDT) and Circle (USDC), hold more US Treasury bonds than major countries like Germany and South Korea. This is noteworthy as end users do not earn interest from holding stablecoins.
In countries with hyperinflation or unstable economies, the decision to hold a stablecoin is often driven by the need for a reliable store of value.
Superiority of Lightning-Powered Stablecoins
Given the stablecoin market’s significant growth, Stark argued for the need to build infrastructure that enables the issuance of stablecoins and real-world assets on the Bitcoin blockchain. This is the rationale behind the development of their protocol.
Stark explained that financial institutions could issue gold assets, stablecoins, and other fiat-backed assets on Bitcoin and then transact over the Lightning Network. She highlighted the cost-effectiveness of this system compared to traditional finance systems and other blockchains.
For instance, while Visa’s fees in the U.S. can reach 3%, the fees for transacting with stablecoins on Lightning can be significantly lower. This could potentially allow people to transact globally at much lower rates than traditional networks.
