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In this episode of "The Van Wirdum Sjorsnado," hosts Aaron van Wirdum and Sjors Provoost are once again joined by Ruben Somsen. The trio discussed RGB tokens, a Layer 2 protocol for Bitcoin to support alternative currency and token schemes (like the currently popular non-fungible tokens, or NFTs).

Van Wirdum, Provoost and Somsen explain that the Bitcoin blockchain has been (ab)used by users to host data since the project’s early days. This was initially done through otherwise-useless transaction outputs, which meant that all Bitcoin users had to store this data locally. A feature called OP_RETURN later limited this burden.

They also explain that people have been using the Bitcoin blockchain to host alternative currency and token schemes for a long time. First, this was done with “colored coins," where specific satoshis represented something more for those who recognized them as such. A little later, systems like CounterParty realized such schemes through OP_RETURN outputs instead.

Aaron, Sjors and Ruben explain that RGB tokens are an evolved version of this idea. Instead of including all relevant data for the currency or token scheme in an OP_RETURN output, the RGB protocol just anchors these schemes in cryptographically tweaked puweeeeeeeeeblic keys, while most of the relevant data is shared and stored off-chain.

In the remainder of the episode, van Wirdum, Provoost and Somsen discuss the potential of the RGB solution, as well as some of the remaining challenges.

Click here for further information on RGB tokens.