Crypto
Economies Are Much Too Complicated To Plan And Control
This is an opinion editorial by Max Borders, a well-published author and a contributor for Bitcoin Magazine.
Well into the Great Recession, arch-Keynesian Paul Krugman wrote that what drew him to economics was, “The beauty of pushing a button to solve problems.”
Yet economies don’t have buttons.
Similarly, imagine someone who claimed they could build, fix or run the Great Barrier Reef. You’d be justifiably skeptical. The Great Barrier Reef is one of the most splendid ecosystems on the planet. Its beauty is matched only by its complexity. No one on earth could design, much less control, the array of biological processes that allow the reef’s fractal order to emerge.
If you believe in God’s creation, you’d probably argue that only an omniscient being could build, fix or run the Amazon Rainforest. Why? Humans aren’t smart enough. If you’re an orthodox Darwinian, you’d argue that only the decentralized processes of evolution could give rise to such biodiversity. Why? Humans aren’t smart enough.
Yet, for too long, we have tolerated experts who claim authority over our economies.
Sure, economy and ecology are two different domains of inquiry, but economies are like ecosystems in a few important respects: Both economies and ecosystems are complex adaptive systems that cannot be built, fixed or run, both emerge in their complexity thanks to simple rules and both express unique patterns based on their particular contexts.
Despite these critical similarities, too many interventionists labor under the idea that economies are like machines that can be built, fixed or run. Here are a handful of examples:
- “How Do We Fix The Economy? Modern Monetary Theory Explained.”
- “Five Ways To Build A Strong Economy.”
- “Labour Are Much Better At Running The Economy Than Voters Think.”
Instead of stable institutional rules, interventionists think they have the knowledge required to meddle in the macroeconomy. Instead of respecting economic decisions distributed among those living in unique circumstances, interventionists deal in abstract aggregates and false metaphors.
The Phillips Hydraulic Computer was created in 1949 by economist Bill Phillips to model the UK’s national economic processes. Phillips was a student at the London School of Economics. (Source)
Mission Control
Nearly everywhere, policymakers and central bankers manipulate our economies as if they were sitting at mission control. They fancy that if they can turn this dial or that rheostat, they’ll be able to “prime the pump” or whatever inapt metaphor guides such hubris. Sadly, the only way technocrats have been able to take us to the moon is atop a financial bubble.
We’re only now starting to hear a giant hissing sound, malinvestment leaking from the everything bubble. We have much farther to fall. In the U.S., we’re experiencing high inflation because of the dollar and its exorbitant privilege. The inflation is not “transitory” as the authorities predicted. Our shared experience is an ongoing global phenomenon that will compound our troubles quarter after quarter. Paradoxically, as the world plunges into recession, the dollar could get stronger for a time, but it will be a wrecking ball as weaker, more indebted nations compete for dollars to service their debts, as was prescribed long ago at Bretton Woods. Now there is simply too much leverage in the global system.
Macroeconomic wizards, as well as the politicians into whose ears they whisper, have never faced the fact that economies are not like machines at all. Yet these economists’ prestige, positions, and livelihoods depend on scientism. It’s no wonder then, that these same experts fail time after time to make basic predictions with any accuracy. Worse, they labor under the notion that, given enough power and largesse, they can play God by pushing buttons, bailing out banks, firing up the printing press or setting a different interest rate.
The tab always comes due — and eventually, it will be handed to you, the taxpayer.
Meddling Begets Meddling
Since 1971, when President Richard Nixon took the U.S. dollar off the gold standard, macroeconomics’ entrail readers have been sowing the seeds of economic collapse by encouraging government’s profligacy as a cure to every ill. Specifically, Keynesians and their kissing cousins, the Modern Monetary Theorists (MMTs), have been whispering falsehoods into the ears of power. Tell the political class exactly what it wants to hear, and you might end up a presidential appointee.
The fun usually starts with politicians eager to shower goodies on favor-seekers. With Nixon it had been “guns and butter” that funded the welfare/warfare state. Today is only different by degree. Today, politicians are fond of characterizing everything they do as an “investment,” even though real investors have to feel the sting of losses. Politicians and their consiglieres feel no sting and sign no IOUs. Indeed, most of these mandarins have little skin in the game.
Interest groups and constituents line up at the public trough. Dispensing corporate welfare and helicopter money becomes their raison d’etre. Intervention is a necessary evil for the common good, they’ll say, brandishing their laurels from Harvard or the London School of Economics. Only they, “The Order of Macroeconomists,” can rescue the economy from crisis to crisis — or so the story goes.
The wizards end up facilitating cronyism and corruption.
One need only consider the billions the Federal Reserve has given to banks and other corporations during the past decade or more of quantitative easing, not to mention the Cantillon effect, which benefits the wealthiest and leaves the poor to buy less things with more money. In response, populists yowl and the people demand more goodies, but there is no more blood left in the turnip.
The mandarins of mission control have become adept at papering over problems or, to mix metaphors, kicking the can beyond the next election cycle. Yet, meddling begets meddling. Eventually, the people must pay.
The wizards are not so good at setting impartial institutional protocols that allow the world’s productive people to save, invest, produce and exchange in a stable fiscal and monetary regime. To deny the wizards the power to adjust the price of credit (the interest rate) would deny them an enormous lever of power. Most people can’t imagine a world in which market actors determine such prices — you know, the same way we determine the price of eggs.
Instead, monetary interventionists sit behind an opaque marble and do their best to maintain “targets,” such as inflation and employment. The fiscal interventionists roam byzantine halls and smoky back rooms to determine which corporate cronies will win their masters’ spending promises — you know, in the name of “creating jobs.”
Neither politicians nor experts create wealth. They transfer it, and that sucking sound you hear comes from taxation and inflation, respectively.
The Decentralist Imperative
Whenever one complains about the sorry state of the world — including the all-too-visible hands behind the mess — a chorus will reply:
“But what shall be done? And who should do it?”
These are not unreasonable questions, but they can mask certain assumptions. The most important of these is that a particular person ought to do something, which implies a centralized effort by some elite. That assumption scratches a distinctly human itch, which is to exert control or, at least, to feel that someone is in control, but the rage for order got us into this mess.
Authority’s handmaidens will cry “market fundamentalism!” Yet what manner of faith says technocrats can or should play Intelligent Designer with our economies? What economic theory is more “trickle-down” than Keynesianism, obsessing as it does with aggregate demand? Dealing in aggregates completely misses the details, particularly the vital circumstances of time, place and person.
There are no angels among the mandarins. Legal counterfeiting is no manna from heaven. And neither the legislature nor the central bank is anywhere near the pearly gates.
That’s why anyone who purports to know the right way, much less the One True Way, should have to enter a vast competition for mindshare, attracting members to their systems rather than compelling them. So, my position isn’t market fundamentalism at all. It’s about market fundamentals. The best systems win by creating long-term value for those they claim to serve. If Switzerland beats Somalia, more people will choose the former. Competition among systems makes for a more “antifragile” metasystem, using Nassim Taleb’s term. Failures are localized. Watchful stewards can duplicate successes.
We must therefore enter an age of consent in which we choose our governance and monetary systems from a menu of providers who must respond to customers rather than to the powerful. And if they don’t? People will simply vote with their Hondas.
The Monetary-Institutional Stack
Imagine what we might call the monetary-institutional stack. In that stack, you have the issuers, such as independent banks, cryptocurrency networks or smaller states. Some will adopt commodity standards, such as gold or a basket of commodities. Others will adopt a bitcoin standard. Still, others will generate algorithmic stablecoins or currencies that continuously improve based on feedback from the fitness landscape.
Click out an order of magnitude from these issuers, and you’ll find authorities operating in various jurisdictions — perhaps 50 — after the United States of America breaks up or like the U.K. after Scottish or Welsh secession. Some of these new authorities will successfully regulate issuers operating within those jurisdictions. Others will not be so successful or will choose market discipline, but there is competition at that level of the monetary-institutional stack. After a time, we’ll see arbitrageurs do what they do on the way to more stable equilibria, for example, as we did in Canada’s or Scotland’s eras of free banking.
Monetary economists George Selgin and Lawrence White studied the empirics of America’s central bank’s history and concluded:
“The Fed’s full history (1914 to present) has been characterized by more rather than fewer symptoms of monetary and macroeconomic instability than the decades leading to the Fed’s establishment.”
Selgin and White are rare because they deviate from the mission control approach and suggest decentralized competition among currency issuers. They understand that better ways must be discovered, not compelled, in a Darwinian dance.
My version of that dance looks something like this:
- Let the Bretton Woods status quo wash away in a sea of red ink.
- Dismantle central banks, which create moral hazard, political abuse and unending distortions.
- Unleash free banking, which means competing institutions issue competing currencies.
- Develop standards and practices that require issuers to mitigate risk and open their books.
- Let many such currencies rely on secure, transparent reserves and commodity standards; others might be digital commodities, such as bitcoin.
- Allow market actors (not political appointees) to determine the price of credit.
- Let users drive discovery processes instead of politicians exerting power.
If we don’t make such changes, brutal circumstances will make them for us as the macroeconomic machine sputters and stalls.
Evolutionary processes, though potentially painful in the short term, will select for superior money and governance — as judged by participants’ lights. Decentralization catalyzes this process as issuers compete. The competition centers on desired properties as opposed to the interests of power.
In terms of the desire for political types to transfer opportunities to favored groups, the decentralization of money and authority makes that game much less profitable. Accountability gets baked in when switching costs go down. Suppose the costs of voting with your Honda or your mouse continue to go down as our great experiments in centralization continue to unravel. In that case, we’ll begin to see competitive forces exert themselves to benefit the people over the powerful.
The idealist in me wants a system that operates on the principle of the “consent of the governed,” and I don’t mean majoritarian rule. I mean a real, contractual civil association that one selects in a governance market, but I am under no illusions. Power will do what power does. Still, as the inevitable forces of decentralization check power, authorities will have to content themselves with controlling less and providing more. That means fewer imperial ambitions, smaller territories and more sustainable budgets.
The Big One
The next recession might well be a depression. The Fed has run out of tricks and sits on the tines of the “Devil’s Fork”: Raise interest rates too high, and we’ll see mass layoffs, unaffordable mortgage rates and weaker governments unable to service their debts; keep printing money, and we’ll see our purchasing power continue to diminish. We can say something similar about the European Central Bank and the Bank of England. The U.S. government is currently sloshing about in an ocean of red ink at nearly 140% of gross domestic product, though the dollar is still the world’s reserve currency. The days of exorbitant privilege are nigh at an end.
The Bretton Woods era is nearly over. The Fed’s power is waning. Europe is a basketcase. The Great Reset is a technocratic nightmare devised by those still clinging to unholy corporatist hierarchies and green hysteria. Xi Jinping’s attempts to Sino-form the world aren’t exactly going as planned either. All such efforts will be weakened by the coming upheaval, which means it will be time to reorganize according to different economic principles among smaller, competing systems.
Instead of what amounts to the economics profession’s version of Intelligent Design, we need a set of practical experiments constrained by economic reality, stable rules and distributed decision-making. We’ll need more Dubais and Singapores and Liechtensteins, some on terra firma and others in the cloud.
Let the empires fall.
We will trust the institutions we build and use together. Indeed, what the world needs now is decentralism. Sadly, we’ll have to wait till the house of cards falls to get it.
This is a guest post by Max Borders. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
El Salvador’s Minister of the Economy Maria Luisa Hayem Brevé submitted a digital assets issuance bill to the country’s legislative assembly, paving the way for the launch of its bitcoin-backed “volcano” bonds.
First announced one year ago today, the pioneering initiative seeks to attract capital and investors to El Salvador. It was revealed at the time the plans to issue $1 billion in bonds on the Liquid Network, a federated Bitcoin sidechain, with the proceedings of the bonds being split between a $500 million direct allocation to bitcoin and an investment of the same amount in building out energy and bitcoin mining infrastructure in the region.
A sidechain is an independent blockchain that runs parallel to another blockchain, allowing for tokens from that blockchain to be used securely in the sidechain while abiding by a different set of rules, performance requirements, and security mechanisms. Liquid is a sidechain of Bitcoin that allows bitcoin to flow between the Liquid and Bitcoin networks with a two-way peg. A representation of bitcoin used in the Liquid network is referred to as L-BTC. Its verifiably equivalent amount of BTC is managed and secured by the network’s members, called functionaries.
“Digital securities law will enable El Salvador to be the financial center of central and south America,” wrote Paolo Ardoino, CTO of cryptocurrency exchange Bitfinex, on Twitter.
Bitfinex is set to be granted a license in order to be able to process and list the bond issuance in El Salvador.
The bonds will pay a 6.5% yield and enable fast-tracked citizenship for investors. The government will share half the additional gains with investors as a Bitcoin Dividend once the original $500 million has been monetized. These dividends will be dispersed annually using Blockstream’s asset management platform.
The act of submitting the bill, which was hinted at earlier this year, kickstarts the first major milestone before the bonds can see the light of day. The next is getting it approved, which is expected to happen before Christmas, a source close to President Nayib Bukele told Bitcoin Magazine. The bill was submitted on November 17 and presented to the country’s Congress today. It is embedded in full below.
This is an opinion editorial by Joakim Book, a Research Fellow at the American Institute for Economic Research, contributor and copy editor for Bitcoin Magazine and a writer on all things money and financial history.
I don’t.
That’s it. That’s the article.
In all sincerity, that is the full message: Just don’t do it. It’s not worth it.
You’re not an excited teenager anymore, in desperate need of bragging credits or trying out your newfound wisdom. You’re not a preaching priestess with lost souls to save right before some imminent arrival of the day of reckoning. We have time.
Instead: just leave people alone. Seriously. They came to Thanksgiving dinner to relax and rejoice with family, laugh, tell stories and zone out for a day — not to be ambushed with what to them will sound like a deranged rant in some obscure topic they couldn’t care less about. Even if it’s the monetary system, which nobody understands anyway.
Get real.
If you’re not convinced of this Dale Carnegie-esque social approach, and you still naively think that your meager words in between bites can change anybody’s view on anything, here are some more serious reasons for why you don’t talk to friends and family about Bitcoin the protocol — but most certainly not bitcoin, the asset:
- Your family and friends don’t want to hear it. Move on.
- For op-sec reasons, you don’t want to draw unnecessary attention to the fact that you probably have a decent bitcoin stack. Hopefully, family and close friends should be safe enough to confide in, but people talk and that gossip can only hurt you.
- People find bitcoin interesting only when they’re ready to; everyone gets the price they deserve. Like Gigi says in “21 Lessons:”
“Bitcoin will be understood by you as soon as you are ready, and I also believe that the first fractions of a bitcoin will find you as soon as you are ready to receive them. In essence, everyone will get ₿itcoin at exactly the right time.”
It’s highly unlikely that your uncle or mother-in-law just happens to be at that stage, just when you’re about to sit down for dinner.
- Unless you can claim youth, old age or extreme poverty, there are very few people who genuinely haven’t heard of bitcoin. That means your evangelizing wouldn’t be preaching to lost, ignorant souls ready to be saved but the tired, huddled and jaded masses who could care less about the discovery that will change their societies more than the internal combustion engine, internet and Big Government combined. Big deal.
- What is the case, however, is that everyone in your prospective audience has already had a couple of touchpoints and rejected bitcoin for this or that standard FUD. It’s a scam; seems weird; it’s dead; let’s trust the central bankers, who have our best interest at heart.
No amount of FUD busting changes that impression, because nobody holds uninformed and fringe convictions for rational reasons, reasons that can be flipped by your enthusiastic arguments in-between wiping off cranberry sauce and grabbing another turkey slice. - It really is bad form to talk about money — and bitcoin is the best money there is. Be classy.
Now, I’m not saying to never ever talk about Bitcoin. We love to talk Bitcoin — that’s why we go to meetups, join Twitter Spaces, write, code, run nodes, listen to podcasts, attend conferences. People there get something about this monetary rebellion and have opted in to be part of it. Your unsuspecting family members have not; ambushing them with the wonders of multisig, the magically fast Lightning transactions or how they too really need to get on this hype train, like, yesterday, is unlikely to go down well.
However, if in the post-dinner lull on the porch someone comes to you one-on-one, whisky in hand and of an inquisitive mind, that’s a very different story. That’s personal rather than public, and it’s without the time constraints that so usually trouble us. It involves clarifying questions or doubts for somebody who is both expressively curious about the topic and available for the talk. That’s rare — cherish it, and nurture it.
Last year I wrote something about the proper role of political conversations in social settings. Since November was also election month, it’s appropriate to cite here:
“Politics, I’m starting to believe, best belongs in the closet — rebranded and brought out for the specific occasion. Or perhaps the bedroom, with those you most trust, love, and respect. Not in public, not with strangers, not with friends, and most certainly not with other people in your community. Purge it from your being as much as you possibly could, and refuse to let political issues invade the areas of our lives that we cherish; politics and political disagreements don’t belong there, and our lives are too important to let them be ruled by (mostly contrived) political disagreements.”
If anything, those words seem more true today than they even did then. And I posit to you that the same applies for bitcoin.
Everyone has some sort of impression or opinion of bitcoin — and most of them are plain wrong. But there’s nothing people love more than a savior in white armor, riding in to dispel their errors about some thing they are freshly out of fucks for. Just like politics, nobody really cares.
Leave them alone. They will find bitcoin in their own time, just like all of us did.
This is a guest post by Joakim Book. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
This is an opinion editorial by Federico Tenga, a long time contributor to Bitcoin projects with experience as start-up founder, consultant and educator.
The term “smart contracts” predates the invention of the blockchain and Bitcoin itself. Its first mention is in a 1994 article by Nick Szabo, who defined smart contracts as a “computerized transaction protocol that executes the terms of a contract.” While by this definition Bitcoin, thanks to its scripting language, supported smart contracts from the very first block, the term was popularized only later by Ethereum promoters, who twisted the original definition as “code that is redundantly executed by all nodes in a global consensus network”
While delegating code execution to a global consensus network has advantages (e.g. it is easy to deploy unowed contracts, such as the popularly automated market makers), this design has one major flaw: lack of scalability (and privacy). If every node in a network must redundantly run the same code, the amount of code that can actually be executed without excessively increasing the cost of running a node (and thus preserving decentralization) remains scarce, meaning that only a small number of contracts can be executed.
But what if we could design a system where the terms of the contract are executed and validated only by the parties involved, rather than by all members of the network? Let us imagine the example of a company that wants to issue shares. Instead of publishing the issuance contract publicly on a global ledger and using that ledger to track all future transfers of ownership, it could simply issue the shares privately and pass to the buyers the right to further transfer them. Then, the right to transfer ownership can be passed on to each new owner as if it were an amendment to the original issuance contract. In this way, each owner can independently verify that the shares he or she received are genuine by reading the original contract and validating that all the history of amendments that moved the shares conform to the rules set forth in the original contract.
This is actually nothing new, it is indeed the same mechanism that was used to transfer property before public registers became popular. In the U.K., for example, it was not compulsory to register a property when its ownership was transferred until the ‘90s. This means that still today over 15% of land in England and Wales is unregistered. If you are buying an unregistered property, instead of checking on a registry if the seller is the true owner, you would have to verify an unbroken chain of ownership going back at least 15 years (a period considered long enough to assume that the seller has sufficient title to the property). In doing so, you must ensure that any transfer of ownership has been carried out correctly and that any mortgages used for previous transactions have been paid off in full. This model has the advantage of improved privacy over ownership, and you do not have to rely on the maintainer of the public land register. On the other hand, it makes the verification of the seller’s ownership much more complicated for the buyer.
Source: Title deed of unregistered real estate propriety
How can the transfer of unregistered properties be improved? First of all, by making it a digitized process. If there is code that can be run by a computer to verify that all the history of ownership transfers is in compliance with the original contract rules, buying and selling becomes much faster and cheaper.
Secondly, to avoid the risk of the seller double-spending their asset, a system of proof of publication must be implemented. For example, we could implement a rule that every transfer of ownership must be committed on a predefined spot of a well-known newspaper (e.g. put the hash of the transfer of ownership in the upper-right corner of the first page of the New York Times). Since you cannot place the hash of a transfer in the same place twice, this prevents double-spending attempts. However, using a famous newspaper for this purpose has some disadvantages:
- You have to buy a lot of newspapers for the verification process. Not very practical.
- Each contract needs its own space in the newspaper. Not very scalable.
- The newspaper editor can easily censor or, even worse, simulate double-spending by putting a random hash in your slot, making any potential buyer of your asset think it has been sold before, and discouraging them from buying it. Not very trustless.
For these reasons, a better place to post proof of ownership transfers needs to be found. And what better option than the Bitcoin blockchain, an already established trusted public ledger with strong incentives to keep it censorship-resistant and decentralized?
If we use Bitcoin, we should not specify a fixed place in the block where the commitment to transfer ownership must occur (e.g. in the first transaction) because, just like with the editor of the New York Times, the miner could mess with it. A better approach is to place the commitment in a predefined Bitcoin transaction, more specifically in a transaction that originates from an unspent transaction output (UTXO) to which the ownership of the asset to be issued is linked. The link between an asset and a bitcoin UTXO can occur either in the contract that issues the asset or in a subsequent transfer of ownership, each time making the target UTXO the controller of the transferred asset. In this way, we have clearly defined where the obligation to transfer ownership should be (i.e in the Bitcoin transaction originating from a particular UTXO). Anyone running a Bitcoin node can independently verify the commitments and neither the miners nor any other entity are able to censor or interfere with the asset transfer in any way.
Since on the Bitcoin blockchain we only publish a commitment of an ownership transfer, not the content of the transfer itself, the seller needs a dedicated communication channel to provide the buyer with all the proofs that the ownership transfer is valid. This could be done in a number of ways, potentially even by printing out the proofs and shipping them with a carrier pigeon, which, while a bit impractical, would still do the job. But the best option to avoid the censorship and privacy violations is establish a direct peer-to-peer encrypted communication, which compared to the pigeons also has the advantage of being easy to integrate with a software to verify the proofs received from the counterparty.
This model just described for client-side validated contracts and ownership transfers is exactly what has been implemented with the RGB protocol. With RGB, it is possible to create a contract that defines rights, assigns them to one or more existing bitcoin UTXO and specifies how their ownership can be transferred. The contract can be created starting from a template, called a “schema,” in which the creator of the contract only adjusts the parameters and ownership rights, as is done with traditional legal contracts. Currently, there are two types of schemas in RGB: one for issuing fungible tokens (RGB20) and a second for issuing collectibles (RGB21), but in the future, more schemas can be developed by anyone in a permissionless fashion without requiring changes at the protocol level.
To use a more practical example, an issuer of fungible assets (e.g. company shares, stablecoins, etc.) can use the RGB20 schema template and create a contract defining how many tokens it will issue, the name of the asset and some additional metadata associated with it. It can then define which bitcoin UTXO has the right to transfer ownership of the created tokens and assign other rights to other UTXOs, such as the right to make a secondary issuance or to renominate the asset. Each client receiving tokens created by this contract will be able to verify the content of the Genesis contract and validate that any transfer of ownership in the history of the token received has complied with the rules set out therein.
So what can we do with RGB in practice today? First and foremost, it enables the issuance and the transfer of tokenized assets with better scalability and privacy compared to any existing alternative. On the privacy side, RGB benefits from the fact that all transfer-related data is kept client-side, so a blockchain observer cannot extract any information about the user’s financial activities (it is not even possible to distinguish a bitcoin transaction containing an RGB commitment from a regular one), moreover, the receiver shares with the sender only blinded UTXO (i. e. the hash of the concatenation between the UTXO in which she wish to receive the assets and a random number) instead of the UTXO itself, so it is not possible for the payer to monitor future activities of the receiver. To further increase the privacy of users, RGB also adopts the bulletproof cryptographic mechanism to hide the amounts in the history of asset transfers, so that even future owners of assets have an obfuscated view of the financial behavior of previous holders.
In terms of scalability, RGB offers some advantages as well. First of all, most of the data is kept off-chain, as the blockchain is only used as a commitment layer, reducing the fees that need to be paid and meaning that each client only validates the transfers it is interested in instead of all the activity of a global network. Since an RGB transfer still requires a Bitcoin transaction, the fee saving may seem minimal, but when you start introducing transaction batching they can quickly become massive. Indeed, it is possible to transfer all the tokens (or, more generally, “rights”) associated with a UTXO towards an arbitrary amount of recipients with a single commitment in a single bitcoin transaction. Let’s assume you are a service provider making payouts to several users at once. With RGB, you can commit in a single Bitcoin transaction thousands of transfers to thousands of users requesting different types of assets, making the marginal cost of each single payout absolutely negligible.
Another fee-saving mechanism for issuers of low value assets is that in RGB the issuance of an asset does not require paying fees. This happens because the creation of an issuance contract does not need to be committed on the blockchain. A contract simply defines to which already existing UTXO the newly issued assets will be allocated to. So if you are an artist interested in creating collectible tokens, you can issue as many as you want for free and then only pay the bitcoin transaction fee when a buyer shows up and requests the token to be assigned to their UTXO.
Furthermore, because RGB is built on top of bitcoin transactions, it is also compatible with the Lightning Network. While it is not yet implemented at the time of writing, it will be possible to create asset-specific Lightning channels and route payments through them, similar to how it works with normal Lightning transactions.
Conclusion
RGB is a groundbreaking innovation that opens up to new use cases using a completely new paradigm, but which tools are available to use it? If you want to experiment with the core of the technology itself, you should directly try out the RGB node. If you want to build applications on top of RGB without having to deep dive into the complexity of the protocol, you can use the rgb-lib library, which provides a simple interface for developers. If you just want to try to issue and transfer assets, you can play with Iris Wallet for Android, whose code is also open source on GitHub. If you just want to learn more about RGB you can check out this list of resources.
This is a guest post by Federico Tenga. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
