Lightning Labs (LL) is the private company developing Bitcoin’s Lightning Network (LN).
LN is a layer-2 scaling solution which enables near-instant transactions which are practically free. Lightning is starting to gain real world adoption, and is now being tested by Square’s Cash App in New York.
But Lightning has even bigger plans. They just announced a large $70 million funding round to build the Taro Protocol.
From LL founder and CEO Elizabeth Stark:
…today we’re announcing Taro, a new protocol to expand the global reach of bitcoin and Lightning by making it a multi-asset network, along with $70M in Series B funding by investors including Valor, Baillie Gifford, Goldcrest, Kingsway, Stillmark, Brevan Howard, NYDIG, M13, Craft, and more.
Among the investors, Baillie Gifford is noteworthy. A traditional asset manager with more than $440 billion AUM.
Taro will allow stablecoins and other digital assets to be created on the Lightning Network. This could allow for all sorts of decentralized financial (defi) applications to be built on top of Bitcoin’s layer-2.
Because Lightning is essentially infinitely scalable (with enough channel operators), Taro could be incredibly powerful for the BTC ecosystem.
I asked my friend Ken Kruger, CEO of Moon, about Taro and he is bullish. Moon is a payments company, and their first product allows people to purchase Visa gift cards with Bitcoin. Ken said they will likely build on Taro. Moon already offers the ability to pay through the Lightning Network (disclosure: I’m an investor).
Taro takes advantage of Bitcoin’s new Taproot upgrade. From the announcement:
Taro relies on Taproot, bitcoin’s most recent upgrade, for a new tree structure that allows developers to embed arbitrary asset metadata within an existing output. It uses Schnorr signatures for improved simplicity and scalability, and, importantly, works with multi-hop transactions over Lightning.
It will take time for developers to build wallets and other infrastructure on Taro, but from what I’m hearing there’s a lot of excitement in the community about this protocol.
Taro could allow Bitcoin to edge in on some of Ethereum’s DeFi market share. NFTs, stablecoins, and possibly even decentralized exchanges down the road.
It’s bullish for Bitcoin, and I suspect we’ll see strong startup investment opportunities among those building on the Taro protocol.