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The Greatest Trick Ever Played, And How Bitcoin Shatters The Illusion

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The Greatest Trick Ever Played, And How Bitcoin Shatters The Illusion

This is an opinion editorial by Andrew Axelrod, a Bitcoin educator and writer whose LinkedIn posts have orange pilled thousands. 

Throughout history, people have always been blinded by the cathedral of their times. Ideas of chivalry, caste systems and royal bloodlines were all incredibly powerful constructs that towered above any possible scrutiny, let alone rebuke.

Today is no different.

Just as fish cannot perceive the water they swim in, it is also difficult for people to recognize the cathedrals for what they truly are. Grandiose narratives, fanciful myths, and seductive lies make for invisible chains.

They are the walls of Plato’s Cave. They are the scrolling green code of the Matrix.

And no prisoner can break free from shackles that remain hidden.

Such illusions are shattered by bitcoin — like waves breaking against solid rock. This is because bitcoin unveils the three most powerful and enduring illusions of our time — those of the competent central planner, the common good, and fiat money.

Let us now step through the looking glass and dissect these magic tricks one by one, starting with the competence of central planners.

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Ah yes, central planners. They aspire to positions of power in the guise of charismatic figureheads, lofty intellectuals, the spiritually enlightened or impressive polymaths who’s vast knowledge spans the fields of economics, finance, healthcare, engineering, infrastructure, energy policy and oooohhhh so many more.

Even better, they are packaged and sold as benevolent leaders that strive for a better tomorrow, acting only out of altruism and for love of the common good. Truth and justice are their names.

Intellect, wisdom and hearts of gold? Sign me up!

Of the three, this is perhaps the easiest illusion to dispel.

At its best, politics is often described as the act of jumping in front of a moving parade while claiming credit. And at its worst, central planners get drunk on the myth of their own competence which inevitably turns the parade into a chain gang shuffle.

This is because central planning at its heart must rely on coercion. Voluntary actions occur organically, bottom up, and on the individual level. By definition, they do not need to be centrally orchestrated.

Next, putting aside the laughable notion that an individual mortal could possess any meaningful level of mastery across so many complex domaines and ignoring the fact that these are flesh and blood humans, naturally prone to self-interest and subject to all the usual dark appetites, it is equally insane to think that an abstraction such as the “common good” could ever be agreed on let alone achieved.

But that, of course, is the entire point.

The common good has always been in the eye of the beholder and is therefore highly susceptible to every possible perversion. It is ideally malleable — custom tailored camouflage for the central planner.

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In the name of the common good, central planners then take upon themselves the right to decide on the conflicts of nations, on conscription in war, on the hollowing out of industry, on the allocation of rations, on the burden of tax (either directly at gunpoint or discretely through inflation) and, most importantly, on who gets to be first in line at the money printer’s trough.

Bitcoin of course flips this on its head. More on that later.

But how does such a ludicrous belief in central planning perpetuate itself — the deranged idea that a miniscule group of people, or oftentimes even a sole individual, should with the flick of a pen decide the wellbeing and economic fate of millions?

It all comes back to the delusion of the common good.

It is precisely this belief in the common good taken to its extreme, a belief in paradise on earth, that justifies the greatest abuses.

This is the corrosive narrative which central planners always draw on for legitimacy and which they use to feed their lust for control. Because ideas of eutopia justify any means to accomplish their end, central planners can use them to maximum effect. Not only do they make dubious claims of a eutopia, but also insist on possessing knowledge of the righteous path that leads to it.

Why go through the trouble of building such a cathedral?

Contrary to the common cynic’s belief, the vast majority of people want to be perceived as doing good and aren’t prone to extremism — a benefit of normal distributions.

Therefore, evil has to cloak itself in the mantle of virtue or else be rejected.

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After all, the road to perdition is famously paved with good intentions.

And what could be more well intentioned than the pursuit of heaven on earth.

This is what lifted the Communists into power, perhaps the most outspoken central planners of them all. It is also what gives the jihadis credibility in the eyes of the faithful and what fueled the rise of Nazi Germany.

The common good is the perfect narrative for central planners to seize the reins of power and gives their followers the iron conviction to follow through on even the most heinous of acts.

And who would dare speak out against them? Who would be so cruel as to deny paradise.

Because when it comes to bringing about heaven on earth — no price is too steep, no sacrifice sufficient and no body count too high.

What do another million dead matter if paradise awaits just around the corner. It is never enough, the bloodlust cannot be slaked.

The nameless mass graves of 80 million killed at the hands of Mao, the 40 million under Stalin, the 20 million under Hitler, the 3.5 million under the Kims and the 3 million under Pol Pot … they all attest to this — slaughtered in the name of this most depraved of fantasies.

The sad irony is that although paradise is an illusion, hell on earth is very real.

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One need look no further than North Korea, where people are publicly executed for the crime of making unauthorized phone calls.

In fact, eutopia and dystopia aren’t opposites — they’re synonyms.

And the surest way to arrive at this terrible destination is to concentrate ultimate power in the hands of a few, in the hands of central planners.

The carrot of eutopia combined with the stick of an emergency — whether it be a classless and plentiful society threatened by the greedy bourgeoisie, or the promise of a thousand year Aryan rule to crush the corrupting globalists or the establishment of a glorious caliphate as a stronghold against the aggressing infidels — these narratives are all designed to rally a core group of true believers and convince the wider public to enshrine in central planners extraordinary powers.

But how then do the actual mechanics of coercion work at scale and how is the average person ensnared beyond just turning a blind eye?

How does the narrative actually transmit into reality?

Through fiat money.

In the words of Henry Kissinger: “Who controls money, controls the world.”

This is the greatest trick ever played.

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If the competent central planner and the common good can be called illusions, fiat money makes these look like cheap parlor tricks by comparison.

Most civilized societies have concluded that central planning of the economy is generally a bad idea. A committee of central planners overriding the free market by setting the prices of commodities, goods and services has always lead to great misery and starvation.

But when it comes to money, suddenly the rules seem to magically change.

At the center of every modern economy sits a central bank who’s explicit mandate is to control the supply of money through its balance sheet and set its price through interest rate fixing.

How can this contradiction be rationalized?

Jordan Peterson famously remarked that only half the lesson of World War II had been learnt.

By this he meant that we’d grappled with the snakepit of national socialism but not the communist den of vipers — a tragic consequence of the Allies’ expedient alignment with the Soviets against the Third Reich.

One key consequence of this was that central planners were allowed to nest in the corridors of power and permitted to desecrate once hallowed institutions.

For example, it is now perfectly acceptable for academics to self-identify as Marxists, which nearly 20% of professors in the social sciences do.

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But even still, the notion that at least half the lesson was learnt is hopelessly optimistic.

The lessons of the past have been reduced to a wild goose chase for the modern day equivalent of an angry-sounding German man in leather boots and a silly-looking mustache. It’s a stultifying distraction from the underlying culprit of fiat money which allowed such madmen to rule in the first place. While society is preoccupied with a frenzied scavenger hunt for goose-stepping fascists, literal central banks have been put in charge of the money. As we will see, this is a clear pattern.

The money printer allows central planners to override free market choices.

What instrument of control could possibly be more perfect.

Endless wars can now be financed with just the push of a button, destructive policies can be pursued no matter the cost and when challenged, central planners can bribe their opposition into compliance with promises of a universal basic income, of “free” education and health care, and of subsidized housing for the needy.

And all of this they can deliver, if only given the power of the printer.

Fiat money lets central planners hide the true cost of their destructive decisions by papering over them. And when society inevitably collides with the walls of reality, this provides central planners with the perfect emergency to centralize even more.

In their greatest time of need, people blinded by panic will turn to the arsonists and beg them to extinguish the fire.

As the black hole of money printing distorts price signals, misallocates assets, and debases society’s savings, people will actually blame “late stage capitalism” for the deterioration.

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Not recognizing the caustic effects of fiat money and centralized power, people will instead cry out for more of the same poison that ails them. When decades of loose monetary policy and insatiable money printing drove America into the Great Depression of the 1930s, the remedy was more centralization.

What followed was the outlawing of gold with Executive Order 6102, the last bulwark against fiat, and thereafter an unprecedented nationalization of private industry that fed the war machine.

In fact, FDR was able to centralize so much power that he became de facto president for life and died while serving his fourth term in office — the only president to ever do so. After his death, a 22nd amendment was hastily added to the constitution, setting a two-term limit on the presidency.

The massive military industrial complex that was erected during this time and has since grown by orders of magnitude, gorging itself on money printing, is something Americans are still contending with — unable to extricate themselves from multiplying conflicts.

When Weimar Germany collapsed under the hyperinflationary fires of the papiermark, the answer was again to centralize. Only this time, the Führer used fiat to turn Germany into a giant weapons manufacturer and burnt Europe to the ground.

And when Lenin’s Soviet Union was ravaged by three successive hyperinflations due to Communist profligacy, Stalin seized the mantle of power, then turned around and brutally butchered the Russian people. In fact, Soviet Russia burnt through a total of seven versions of the fiat ruble and endured seven painful resets.

The central planner’s fiat trick became so routine that Soviet workers would famously joke: “We pretend to work and they pretend to pay.” But of course, every fiat money must find a point of exhaustion, when the money printer’s ink runs dry. It is for this reason, that the seemingly opposite Eastern communist and Western capitalist systems were at least similar in this way:

Both ultimately believed in top-down control through fiat money.

Only the communists, spurred on by a more rabid fanaticism, made the fatal mistake of centralizing every nut and bolt of their economy, involving the government in decisions ranging from the harvesting of crops to the manufacturing of shoes and the production of cars. This ended in incomprehensible human suffering.

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Central planners in the West took a more tactful approach by first allowing their economies to self organize and fatten up before milking them dry via centralized money.

And so, fiat is the greatest trick ever played. It is also the ultimate heist, allowing central planners to siphon off a population’s entire productivity and exhaust its every resource through the counterfeiting of money. Fiat money is watermelon socialism — capitalist green on the outside and communist red at its core.

As justification, central planners must contort themselves into impressive mental pretzels and invert the truth. Some of these brazen lies famously include:

  • That the constant manipulation of money is productive and necessary.
  • That Keynesianism is a legitimate school of thought which every economics major must be indoctrinated with.
  • That money printing does not cause price inflation.
  • That price inflation, which invariably follows, is actually good because it also inflates GDP. For some reason, less affordable prices of goods and services are claimed as positives by this twisted logic.
  • That the financialization of economies and stripping of their real assets through deindustrialization are actually markers of prosperity.
  • That recessions no longer exist and employment is full because these terms can be easily re-defined to suit, in true Orwellian fashion.
  • That the fiat driven credit boom and bust cycles which lead to great depressions and war are natural and good.
  • That central banks are staples of a free market economy.
  • And of course, the slandering of bitcoin as a mere toy for criminals and plaything of fringe anarchists.

That’s right.

War is peace. Slavery is freedom. Ignorance is strength.

But what if money could not be printed at will? If money bore an actual cost, then central planners’ maleficence would become almost instantly and laughably obvious. The people’s pocket could no longer be picked with inflation and the central planner’s incompetence would incur an immediate and tangible cost. Want to wage wars? You’ll need to pay for them. Want to fund wasteful government programs? You’ll need to justify them. Want to bankrupt your citizens and leave them destitute? You’ll need to face them.

Central planners could no longer destroy the world on credit and would be required to close out their tab. The cost of unproductive and wrongheaded action would come to bear immediately and allow society to course correct. This is what bitcoin does by separating money and state. It takes the central planner’s favorite tool of coercion and snaps it in half like a brittle twig. Once money can no longer be printed, what good are moral posturing and illusions of grandeur.

Bitcoin strips the lie of the common good down to the hollow and empty shell that it really is and exposes any shred of unearned competence the central planners have left.

Their trick revealed, central planners will finally be forced to take a bow — they just shouldn’t expect any applause.

This is a guest post by Andrew Axelrod. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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El Salvador Takes First Step To Issue Bitcoin Volcano Bonds

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El Salvador Takes First Step To Issue Bitcoin Volcano Bonds

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.

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How I’ll Talk To Family Members About Bitcoin This Thanksgiving

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How I’ll Talk To Family Members About Bitcoin This Thanksgiving

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:

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  • 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.

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RGB Magic: Client-Side Contracts On Bitcoin

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RGB Magic: Client-Side Contracts On Bitcoin

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.

Title deed of unregistered real estate propriety

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:

  1. You have to buy a lot of newspapers for the verification process. Not very practical.
  2. Each contract needs its own space in the newspaper. Not very scalable.
  3. 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.

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transfer of ownership of utxo

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.


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.

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