On the way to Bitcoin Citadels via the RGB Protocol

On June 13, 2022, the RGB Protocol has been released on top of the Bitcoin blockchain. It is no coincidence that the RGB Protocol was presented a few days later by Maxim Orlovsky and Olga Ukolova at the University of Neuchâtel (Switzerland) as part of a conference devoted to “The Bitcoin Paradigm”. The Canton of Neuchâtel is indeed home to a large Bitcoin community that is active in the development of decentralized finance (DeFi) services, or rather bitcoin finance (BiFi) services.

This blog post discusses the main features of the RGB Protocol with the (very precious) help of Olga Ukolova for the technical aspects.

Where we discover the scalability of Bitcoin through RGB

The RGB Protocol is one of those new applications designed to help solving the Blockchain Trilemma of Bitcoin. According to this concept (coined by Vitalik Buterin; about this concept, see e.g. here), the three characteristics that a blockchain must have in theory – decentralization, security and scalability – cannot be implemented in practice, forcing developers to sacrifice one of these essential elements. For example, Bitcoin has prioritized decentralization and security, while Ethereum is deemed to have a decentralization issue. (Note that, in my opinion, we could also add sustainability among the basic requirements that a blockchain should have.)

In their presentation, Maxim Orlovsky and Olga Ukolova highlighted the fact that the solution to remedy the scalability issue of Bitcoin is to go off-chain on a layer implemented on top of the base blockchain. RGB remedies the lack of scalability of Bitcoin by offering a scalable system that increases transaction speed. This is achieved by implementing RGB directly on top of Bitcoin, as a second layer, or on top of the Lightning Network, as a third layer. The transactions performed on RGB happen thus off-chain and are not immediately recorded on the Bitcoin network. RGB developers make a concession to security by assuming that not all transactions need to be verified with a global consensus. This solution uses smart contracts which operate with client-side validation paradigm, meaning that all the data is kept outside of the Bitcoin transactions. Since it is not necessary to reach consensus, the speed of the transactions increases significantly. RGB resorts also to the concept of single-use seals as a security mechanism. This provides for any party having smart contract state history the ability to verify its uniqueness (for further information, see here).

Where we see the possibility of an island of privacy

But from a normal user’s point of view, one of the main advantages of this application lays in the fact that it brings more privacy to the Bitcoin blockchain. By keeping the smart contract code and data off-chain (i.e., outside of Bitcoin transactions), RGB offers more confidentiality than Bitcoin because the data is known only to its owner. This protocol allows each user to regain control over their own data, which ultimately contributes to the construction of a digital identity. Olga Ukolova stated in this regard that this is one of the leading concepts behind the development of RGB and other protocols by LNP/BP Standards Association. The members of this association are committed to developing open standards and protocols on top of Bitcoin and Lightning Network in order to build an Internet “where individuals can finally reach digital sovereignty”. RGB helps to create a “properly structured digital identity”, which is defined by Olga as an identity that is “individual-centric and private, with no backdoors for governments and corporations to spy on you”.

The RGB Protocol is a true application of Web 3.0 which is premised on the construction of a “user-centric” architecture. Web 3.0 is characterized by decentralization and the redistribution of the power over data from centralized platforms (such as Meta, Google and Amazon) into the hands of users. While the main purpose of blockchain technology is to remove intermediaries (such as financial institutions for Bitcoin), the main purpose of Web 3.0 is to remove the platforms acting as intermediaries. It has been stated that “at the heart of the Web3 movement is a philosophical goal of decentralized and democratized control of the internet instead of control vesting in an oligarchic set of interdependent multinational corporations or traditional superpowers” (Jon Garon, Legal Implications of a Ubiquitous Metaverse and a Web3 Future, 2022).

However, this ideal may be difficult to achieve and many fear that Web 3.0 will not really be as decentralized as one might hope. The influence of large platforms on this environment seems inescapable considering the means they invest into the development of Web 3.0. Analysts consider that there will not really be a decentralization, but a power shift from the large companies managing existing platforms to other (or the same) large companies using blockchain technology. It is to fight against the tendency to move towards the centralization of the Internet that Jack Dorsay announced on June 10, 2022 an upcoming Web 5.0, which would be created in a near future on top of the Bitcoin blockchain. The main objective of Web 5.0 is to make the Internet truly decentralized and to give back to the users the real ownership of their data and the control of their digital identity. Web 5.0 is envisioned as a kind of fusion between Web 2.0 and Web 3.0: while Web 2.0 is characterized by the sharing of information on the Internet, where users can download and upload information on platforms (e.g., posts on Facebook, videos on YouTube), Web 3.0 should take the power out of the hands of the platforms and transfer it to the users thanks to the decentralization offered by blockchain technology.

In line with the idea of putting users at the center of the Internet, the developers of Web 5.0 have decided not to use utility tokens in order to prevent venture capitalists from getting rich on users (see here). The developers of the RGB Protocol have adopted the same vision by refusing to launch a native token. According to Olga, the absence of token ensures that the greed of some users does not lead to unstable game theory equilibrium ending up with a collapse of the system. She explained that “the objective is to avoid people starting using the protocol to get rich quick via token pump, which creates pressure on the developers to spend their resources on supporting the price of the token instead of improving the protocol itself. RGB is a technology, not a promise of becoming rich quickly, and it will stay that way”.

Where we push the gates of the Bitcoin Citadel in search of the true colors of RGB

Olga stated that she and other scientists (like Maxim Orlovsky) have moved to Neuchâtel because this place has been one of the few European centers to embrace progress brought by Bitcoin and to provide dynamic support for disruptive businesses and technological innovation. This Swiss Canton is considered by Bitcoin enthusiasts as a new Bitcoin Citadel. To quote Olga: “The future of Bitcoin Citadels is being built here and we are proud to be one of the creative forces.” To understand this statement, it should be noted that Bitcoin Citadels are considered as safe havens for Bitcoin communities. The origin of Bitcoin Citadels is to be found in a story describing an unequal utopian society, divided between Bitcoiners and no-coiner slaves (Luka Magnotta, I am a time-traveler from the future, here to beg you to stop what you are doing, 2019).

This reference to Bitcoin Citadels led me to ask myself the meaning of the acronym “RGB”: does it have anything to do with the colors Red, Green and Blue, as in the RGB Color Model which is a computer color coding system? The analogy with colors made me think of “Red Rising”, a dystopian science fiction novel by Pierce Brown, where society is organized as a hierarchical pyramid, each social class being designated by a color and being in charge of a specific role in society. Technology holds a central place in this society that has conquered space and whose origins lie in a revolt against earthly authority. In this society, Greens are the programmers and developers of technology, Blues are pilots and astronavigators who crew starships, and Reds are manual laborers conditioned to brutal environments. The novel depicts the story of a Red (the lowest social class) who rises to the top of society by pretending to be one of its rulers in order to overthrow the established order. The rulers are, of course, very keen to defending their privileges; they are Golds, a color that also begins with the letter G. The utopian society described in this novel could be an allegory of the Bitcoin Citadels.

However, it has been stressed that the Bitcoin Citadel fantasy is just a metaphor for the sovereign individual (Ben Munster, The Bizarre Rise of the “Bitcoin Citadel”, 2021). This interpretation is clearly more in line with Olga’s strong commitment to the building of a self-sovereign and individual-centric world. If RGB has nothing to do with colors, then what does the acronym “RGB” stand for?

About the RGB Protocol, read also “Is the Bitcoin Paradigm moving from virtual to real?”.

Proposition de citation : Guillaume Florence, On the way to Bitcoin Citadels via the RGB Protocol, Blog du LexTech Institute, 06.09.2022