I feel like Taro is very under-understood, under-appreciated and under-hyped. It's much more than another Lightning Labs feature w a curious name or even just "tokens on Lightning".
It could potentially shake things up big time in how the whole crypto industry works:
🧵👇
It could potentially shake things up big time in how the whole crypto industry works:
🧵👇
Below are some thoughts based on my current understanding, which might be wrong, so please do @ me if I'm being dumb somewhere.
First, have a look at this image. In this chart Bob and Carol are edge nodes that offer to convert BTC to "L-USD" at an exchange rate they expose via the LN API. Alice's node's routing algorithm will natively decide the best route, also from a cost (exchange rate) standpoint. 
This means that every routing node can become an exchange from token A to token B.
1) Every Lightning Node Can Now Be An Exchange.
Exchanges that don't need marketing or UI, just open some channels and set a good FX rate and volume will show up, just like routing works today.
1) Every Lightning Node Can Now Be An Exchange.
Exchanges that don't need marketing or UI, just open some channels and set a good FX rate and volume will show up, just like routing works today.
2) Pay in currency of sender's choice, receive in currency of recipient's choice.
This means that every wallet can now have native Strike-type "USD balance" functionality for example. With no need to trust the wallet, the only trust lies in the issuer of the token.
This means that every wallet can now have native Strike-type "USD balance" functionality for example. With no need to trust the wallet, the only trust lies in the issuer of the token.
This is especially useful for custodial-to-custodial stablecoin transactions that now don't need to go on chain at all.
3) Companies can choose to receive payments in stablecoin, removing the volatility argument for those who prefer to not touch BTC for those reasons. And users too can receive their paycheck in USD if they so chose, and pay wherever lightning is accepted.
4) No new tech needed for those currently operating Lightning nodes. Just upgrade to the latest LND and you'll be able to send and receive payments that originated in any other currency. Everyone is responsible for ensuring liquidity exists somewhere to route payments to them.
All this in an open marketplace, with all of Lightning's current privacy properties, and instant transfer and settlement. If market becomes efficient the FX fees should be similar to routing fees today: low/negligble.
Want to launch a shitcoin? You really shouldn't. But if you want to anyway - all you need is to open channels to some big routing nodes and suddenly your shitcoin is available to anyone w/ a lightning wallet, and can be used to at any service where lightning is accepted.
Why bother with rolling out on 5 different EVM-based networks and begging exchanges to list variants of your token if it can be instantly tradeable across a wide and cohesive network that already works?
Of course, this will also create demand for exchanges and wallets to finally integrate Lightning, even though the role of the exchange gets diminished and exposed to open competition.
Maybe we'll even get that MetaMask integration ;)
Maybe we'll even get that MetaMask integration ;)
What about the coins that aren't available on Taro? Well, luckily the DeFi community have popularised "wrapped" tokens, so I'm sure the good folks at BitGo et al will gladly provide wrapped ETH, Cardano and whateveryouwant on lightning, with instant transfers and usability.
Especially given the current diversification/"sharding" in the Ethereum/EVM-space with multiple competing L1/L2 chains, this is a big opportunity for lightning to be the one solution that gets them all.
In conclusion: I think Taro can achieve even more for Lightning than ERC20 did for Ethereum. It would be fair to call it Lightning 2.0.
All this of course depends on many factors, in a chaotic world, not least getting all this to work, and into the hands of the reckless crowd.
All this of course depends on many factors, in a chaotic world, not least getting all this to work, and into the hands of the reckless crowd.
Seems I got some flak from people perceiving me to take sides between competing implementations of tokens on Lightning.
To be clear: I'm not taking any side, I will root for them all and hope that at least one succeeds :)
To be clear: I'm not taking any side, I will root for them all and hope that at least one succeeds :)
Also it should be pointed out again that none of this stuff exists in the wild yet, so all of this should be seen as rambling meditations on what a future _might_ look like. There is and will be plenty of isses and tradeoffs that will need to be solved on the way.
What I found interesting in the Taro spec that I think I haven't seen yet (I'm very ignorant here so it very well might exist elsewhere) is the ability for nodes to offer conversion functionality, and allowing routing across it.
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