Bitcoin’s layer-2 chain, Lightning Network, will begin supporting stablecoin transfers in $USDC.X and $USDT.X – enabling greater multi-asset functionality on the Bitcoin network.
Bitcoin Taproot, an upgrade released in November 2021 which improved Bitcoin’s privacy and security, made stablecoin transactions possible and introduced smart contracts to the Bitcoin network. In effect, Lightning will help enable stablecoin transfers using Taro Protocol, which allows developers to move stablecoins from the Bitcoin network to the Lightning Network. They will not issue stablecoins, but will simply allow people to move money across the networks.
Lightning Labs, the team behind Bitcoin’s cheaper and scalable “fast lane”, plans to roll out the feature in the coming weeks.
The aim behind allowing stablecoin transactions on Lightning networks is to bring about additional functionality and innovation on Bitcoin. In an interview with The Block, Lightning Labs co-founder and CEO said, “When it comes to the Lightning component, you’re routing through bitcoin.”
“You’re literally doing a conversion from dollars [stablecoins] to bitcoin, back to dollars.”
Currently, Lightning Network is being used by several companies, including Bitcoin payment company Strike, the tipping feature on Twitter, and crypto exchange Kraken. As a result of the latest development, it will add an important feature to its network, which will broaden its horizons.
The company’s increased importance (and growth trajectory) in the Bitcoin ecosystem helped it raise a Series B round from Valor Equity Partners. Baillie Gifford, Goldcrest Capital, and several other angel investors also participated in the $70 million fundraise.
A number of developments have taken place regarding Bitcoin and DeFi and technology. Last month, Bitcoin Odyssey was launched which is a grant program with $165 million in funding designed to introduce Web3 elements to Bitcoin. These developments underscore how the blockchain world is diversifying and that Ethereum is not the only transaction engine for cryptos.