The RGB Network
Smartening Up Bitcoin
RGB, which stands for “Really Good for Bitcoin” (not even kidding), is a smart contracts system that integrates with the lightning network. It was initially proposed in 2016 by Giacomo Zucco and Peter Todd to improve Bitcoin’s “Coloured Coins” project, where real-world assets can be allocated to specific Bitcoin.
RGB addresses the scalability and transparency issues from Bitcoin’s mainchain by using smart contracts, where a pre-arranged agreement is made between two users that automatically completes once the conditions of this agreement are met. There’s no KYC needed so anonymity and privacy is maintained and you actually don’t need to interact with Bitcoin’s mainchain at all due to RGB integrating with Lightning.
This opens up a world of scalable possibilities on Bitcoin such as creating NFTs, utility tokens, fungible assets, Decentralised Exchange functionality and smart contracts without needing to go through any arduous KYC procedures! For example, with RGB, you will be able to send the file related to the NFT in the same transaction as the Bitcoin itself to another user (with other chains, this file has to be sent separately).
Once you send an asset via RGB, you will not be able to see where it goes after and even if you receive an asset, it’s history will be difficult to unravel providing greater privacy for users.
Preparation for layer 3
Although RGB will operate mainly within the Lightning Network, some services that are built on top of Lightning (such as tokenising assets and Decentralised Exchanges) can also considered “third layer”.
Bitcoin mainchain acts as the base layer for final settlements and prevents double-spend, second layers like Lightning, Liquid, RGB etc are for faster, anonymous transactions and then apps built on top of this for all kinds of things in the third layer such as NFTs, tokenised assets etc.
RGB is a smart contract implementation that operates with a client-side validation paradigm. All the data is kept outside the bitcoin transactions, such as the bitcoin blockchain or lightning channel states. This allows the system to operate on top of the Lightning Network without any changes to the LN protocols.
As a security mechanism, RGB uses single-use seals defined over bitcoin transaction outputs (UTXO). By connecting it to a UTXO, it provides the ability to verify the uniqueness of a contract state. Verifications are done openly and can be done by any party. In other words, RGB leverages Bitcoin script for its security model and definition of ownership and access rights.
RGB operates in “shards”, where each contract has a separate state history and data; different smart contracts never intersect in their histories directly. This allows for another level of scalability.
While being separately maintained, RGB contracts may interact via Bifrost protocol over the Lightning Network, allowing multiparty coordinated state changes, enabling functionality like DEX over Lightning etc.
Thus, by their abilities, RGB smart contracts go beyond what is possible with the Ethereum-like smart contract system, providing a more layered, scalable, private and safe approach, where the ownership of the smart contract state is separated from the smart contract creation.
The RGB network is as Turing complete as other smart contract blockchains but doesn’t try to monetise access to the networks resources and computational power by creating a new utility token or security and leverages bitcoin.
Using the RGB network as a framework, developers can create various tools such as decentralised exchanges, DEFI protocols, Tokenised assets like stablecoins and NFTs.
In addition to providing all these new features, it leaves no on-chain footprint and includes zero-knowledge proofs to private more layers of privacy for users.
If you’re still interested in learning more about RGB or would like to use the technology and keep up with the latest updates, then check out the following resources.
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