A Possible New ERC-20 Standard for Bitcoin

The RGB protocol is a framework similar to Ethereum's ERC-20 standard for issuing and transferring tokens.

The RGB protocol is a framework similar to Ethereum's ERC-20 standard for issuing and transferring tokens. RGB is almost as old as the largest smart contract protocol itself. The network is based on research into one-way seals and client-side validation.

The further development of this research led to the creation of the RGB protocol, a full-fledged smart contract system. Really good for Bitcoin—because that's what RGB promises. Just like the Lightning Network Protocol (LNP), RGB improves the scalability and transparency of the base layer. The integration makes NFTs, smart contracts, and DeFi applications on Bitcoin possible, for example.

Besides benefits like scalability or off-chain smart contracts, layer-2 networks like RGB also have drawbacks for the oldest cryptocurrency.

RGB Protocol: Really Good for Bitcoin

The RGB network operates with a so-called client-side validation paradigm. This means that all data is stored outside of Bitcoin transactions. This allows the system to be used on Lightning without changes to LN protocols. RGB uses one-way seals as a security mechanism, defined through the so-called Bitcoin transaction outputs (UTXO).

By linking to a UTXO the user has the ability to validate, for example, the uniqueness of a contract status. Verifications are open and can be performed by any party. In short, RGB uses Bitcoin for the security model and the definition of ownership and access rights for tokens like NFTs.