Tokens on

Lightning Network

Alekos Filini (@afilini) - Developer at BHB Network

AKA

Really Fast Exit Scams

Disclaimer

  • We don't like ICOs
  • We think that most of the tokens out there are useless
  • We don't want to encourage scams
  • But still..
  • We think that this is a really cool research project
  • And also a solid platform in case you really want to issue a token

RGB Recap

  • We start from a colored coin protocol
  • Move colored coins by adding meta-data in OP_RETURNS
  • All readable and verifiable by everyone

Bitcoin TX

RGB Recap

  • We can move the meta-data off-chain, and replace them with an hash
  • Verified only by the receiver and future owners
  • A little bit more plausible deniability/privacy
  • Allows to encode tons of data
  • Drawback: we have to move the data somehow..
  • Not a big deal if we are on Lightning

RGB Recap

  • One more thing...
  • Use pay-to-contract instead of OP_RETURNS
  • Even more plausible deniability
  • Save a few bytes and satoshis in fees

Why is this LN-compatible?

  • RGB transactions are dumb
    • Tie assets to a UTXO and let the Bitcoin layer decide
    • RGB doesn't care who will spend it
  • Also compatible with eltoo
    • Even with pay-to-contract!
    • The update transaction commits to a fixed proof
    • Thus the script_pubkey doesn't change

Moving on top of LN

  • Try to be retrocompatible
  • Choose some feature bits
  • New messages to encode extra stuff
  • Define an RGB-equivalent BOLT #3
  • Make sure vanilla nodes pass our gossip messages around

Solving the Liquidity Problem

  • We cannot expect full colored routes around the network
  • But we can atomic swap!
  • The routing protocol will look for the cheapest path
    • It might involve some atomic swaps
  • We also gossip two exchange rates (asset/SAT - SAT/asset)

Dashed nodes = normal nodes

RED -> BTC -> BTC -> RED

Dashed nodes = normal nodes

Current Limitations

  • No CryptoKitties 😭😭😭
    • Non-fungible tokens cannot be moved out of an open channel*
  • Possible "blacklist" from vanilla nodes
  • You can receive tokens only if you have a channel "colored" with that asset*

*There could be a way to do some kind of "splicing" without going on-chain, but I'm still working on that

Thanks!

Questions?

https://github.com/rgb-org

https://slides.com/afilini/rgb-lightning-nyc

RGB on Lightning Network - NYC

By Alekos Filini

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RGB on Lightning Network - NYC

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