A new technology is about to be released for Bitcoin and it could completely change the cryptocurrency landscape in the coming years. Understand more about the RGB protocol, which can become the base infrastructure of the new economy.
Bitcoin is the main cryptocurrency on the market, but it is currently very little used for the largest applications within the crypto asset ecosystem. NFTs, tokenization and identity integration via wallet were applications that went far from the common bitcoiner’s lexicon.
Bitcoin vs Ethereum, an unfair dispute?
This market gap has been filled by other platform solutions like Ethereum, BNB and other solutions. Ethereum, for example, has plugged thousands of apps ranging from Discord to Reddit into its chain, with one click on the Metamask wallet you have your digital assets within virtually any of the digital world. Meanwhile, the most popular cryptocurrency community has become confined to the ecosystem itself.
This is due to the conservatism of the BTC developers and community. The responsibility of being the first, biggest and most important cryptocurrency weighs heavily when it comes time for the community to make any major changes to the network. Furthermore, Bitcoin is truly decentralized, reaching consensus on a decentralized protocol is extremely complex.
For this reason the Bitcoin developers had two paths: decrease decentralization and update the code quickly or maintain decentralization and use the tools that the BTC blockchain offered.
The most complex path was to develop applications with the few BTC tools. Unlike Ethereum, Bitcoin smart contracts are limited by security concerns and the ability to tokenize on the blockchain is diminished due to a 1MB block.
The few tools available in this tool set allowed the construction of a payment network on top of the Bitcoin blockchain, the Lightning Network (LN). LN is truly a fast and efficient peer-to-peer payments network.
But for it to work, it needs its own nodes running the bitcoin blockchain, which have liquidity (bitcoins) and high availability. LN went from 50 nodes in 2018 to 17,918.
It turns out that this blockchain-based peer-to-peer network of nodes is underused, it can do much more than just transmit bitcoins. Files, contract information, tokens and cryptographic validations could also pass through this network, with bitcoin being the default currency.
But how to do it? That’s where the RGB protocol comes in, a big draw from several developers and companies, which can launch bitcoin to the next level of adoption.
What is Bitcoin’s RGB protocol?
The RGB (Red-Green-Blue) protocol is an open source system that allows the creation of personalized, secure and scalable digital assets over the Lightning Network. It provides a platform for developers to create and issue their own tokens, securities and other digital assets.
But instead of creating a new blockchain for each new asset, RGB uses the Lightning Network as a foundation.
Here are some examples of how the RGB protocol can be used:
- Tokenization of Assets: The RGB protocol can be used to tokenize assets such as real estate, gold or other commodities. For example, a real estate developer could create a digital token that represents property in a real estate project. These tokens can be traded with bitcoin, allowing for fractional ownership and making it easier for investors to buy and sell.
- Creation of securities: RGB can also be used to create securities such as stocks, bonds or other financial instruments. For example, a startup could issue tokens that represent shares in the company, allowing investors to participate in the company’s growth and success.
- Digital art: RGB can also be used to create and sell digital art. Artists can issue limited edition tokens that represent ownership of their work, providing a new source of revenue and a way to authenticate their creations.
In addition to all these functions, perhaps the biggest advantages of RGB are its intrinsic requirements such as high scalability, the ability to execute smart contracts using peer-to-peer, the possibility of sending files and the increased privacy of each new token or contract. All this done on top of an existing infrastructure.
RGB: Killer app for the cryptocurrency market?
In addition to having a ready and underused infrastructure, RGB was born with the most traded crypto asset on the market as the main case for use, the stablecoin USDT.
RGB can be used to move USDT’s US$70 billion marketcap, as Bitfinex is the creator of the stablecoin and also the main brand behind the development of the protocol. This would make LN ubiquitous across the thousands of exchanges and services that depend on the billions of dollars moved via the stablecoin.
Bitfinex seems to be invested in this new protocol, which includes participation by major players in the Brazilian crypto market.
Development is at an advanced stage, there are already tools for developers who want to test the solution and a wallet using bitcoin on a test network that allows the creation of tokens and nfts.
The RGB protocol can definitely become a kind of “killer app” for the cryptocurrency market, perhaps it is the missing spark to start the mass adoption of the second layer of Bitcoin (BTC).
End of Ethereum? Or a new era for Bitcoin?
The adoption of RGB by the Bitcoin community will mean that, for the first time, BTC will have features similar to Ethereum and other altcoins.
This will move bitcoin towards adopting integration solutions perhaps similar to those used by Ethereum. The community will have a whole range of new uses for bitcoins, from NFTs to new tokens. With the advantage of a larger user base and a community extremely engaged with the “bitcoiner” philosophy.
The path of integration with apps like Discord, Reddit and others, already trodden by Ethereum, will reach another level for Bitcoin. With Lightning, we will have much cheaper payments than on the Ethereum network, extremely functional smart contracts, instant payments and private tokens. The advantages are enormous.
It will probably not be the end of Ethereum, which has been improving the integration experience with other ecosystems for at least 5 years, but a dawn of a new experience with Bitcoin. In the longer term, however, new BTC applications could impact the use of altcoins. Why use them if you can do the same thing better, paying less and with more liquidity?
The leading cryptocurrency will be the last to join the party of complex smart contracts, NFTs and integrations, but when it arrives it has the potential to completely change the way we interact digitally.