Taproot Assets

2 min read

Taproot Assets is a protocol that allows people to issue digital assets on the Bitcoin blockchain. These assets can be transferred over the blockchain itself through an on-chain transaction, or they can be transferred instantly, at low cost, and more privately over the Lightning Network, when deposited into a channel.

Taproot Assets combines six components of Bitcoin’s technology:

  1. The Bitcoin network for security and stability, as all Taproot assets are anchored to the Bitcoin blockchain. This means these assets are part of a piece of hashed data that is attached to a transaction in the blockchain. Due to Bitcoin’s 24/7 uninterrupted operations and high level of security, a user can be certain their assets are always safe and transferable.
  2. The Lightning Network for speed, scale and low fees. Similar to transferring satoshis, it is cheaper, faster and more scalable to transfer assets over Lightning.
  3. Taproot, an upgrade made to Bitcoin in 2021, is used to embed asset metadata into an existing transaction input.
  4. Schnorr Signatures are used for simplicity and improved scalability.
  5. Sparse Merkle Trees enable fast, efficient, and private retrieval of, and updates to the transaction data.
  6. Merkle Sum Trees are used to prove that no new assets were created and there is no inflation, without having to reveal all of the information to any observer.

Supported assets on Taproot Assets are divisible ones such as currencies, or limited edition assets like collectibles or tickets. There is no limit to how many assets can be created in one on-chain Taproot transaction or how many accounts hold these assets.

Taproot Assets is still in its infancy and may enable novel, currently unforeseen use cases for Bitcoin. See a more extensive introduction to Taproot Assets in the builder’s guide.