Bitcoin has evolved beyond being just a payment coin and has seen new technological advancements in recent months. These advancements aim to create layers on top of Bitcoin, with the goal of building a secure system of smart contracts that can scale and be secured by the most reliable blockchain.
One of these advancements is the RGB Protocol, which stands for Really Good Bitcoin. It is a community effort to make technology for building smart contracts widely accessible. The idea for RGB was first introduced about a year ago and was discussed in the Bitcoin developers mailing list.
What sets RGB apart is its ability to decouple smart contracts from the need for a native blockchain. This makes RGB a scalable technology that can be secured through a Bitcoin block. Unlike other platforms, RGB will not issue its own token or promote any form of investment. Instead, it relies on voluntary support to improve the protocol.
RGB has gained support from popular developers within the crypto community, although they prefer to remain anonymous. One of the leading developers, known as @crypcipher, showcased the potential of RGB technology in March, leading to a surge of new applications in the past month.
At the core of RGB is the principle that all smart contracts must undergo client-side validation before they can be broadcasted to a selected blockchain. This eliminates the need for network consensus. Transactions between the parties involved in an RGB contract are completely private, with only a hash number recorded on the blockchain instead of plain text. This ensures that the original RGB contract action cannot be reversed and cannot be derived from the hashed value.
The adoption of RGB has also sparked the creation of new sub-projects. While the RGB developers themselves do not promote tokens or startups, other developers are leveraging the trend to offer RGB-based products. The inclusion of the RGB letters in project names on social media signals affiliation with the new technology, similar to the use of .eth name handles and personalized addresses.
Participation in the RGB ecosystem begins with using updated wallets that are compatible with the Lightning network. Additionally, RGB projects may initiate their marketing efforts with airdrops to generate interest among a wider user base.
While the idea of decentralized exchange (DEX) trading using Bitcoin and the Lightning network has been discussed since 2021, the current wave of projects aims for mass adoption. New wallets are being introduced to capture and consolidate other Bitcoin-based trends, such as Ordinals and Runes, as well as BRC20 tokens.
One notable project, RGBEx, is inviting developers to test the generation of new assets and build decentralized trading. The project is also working on establishing test liquidity by offering USDN, the RGB version of Tether (USDT), which will facilitate the creation of the first test trading pairs.
However, RGB’s private nature poses challenges for decentralized exchanges, as they will not be able to track swaps or lock the total value. Clients using RGB will also face added complexity, as both parties involved in a contract must coordinate. Furthermore, users will be responsible for storing data related to the state of their RGB assets, which can create storage burdens and require good internet speed when interacting with other participants or nodes.
