🔗RGB

RGB is officially described as "a protocol to issue and transfer digital assets and more generic rights on the Bitcoin blockchain through the use of customizable off-chain smart contracts."

One-Time Seals

The concept of one-time hermetic seals, first introduced by Peter Todd in 2016, allows you to lock an electronic seal on a message, ensuring that the message can only be used once. Specifically, we can use Bitcoin’s Unspent Transaction Outputs (UTXOs) as seals for messages, and the Bitcoin system’s consensus mechanism ensures that these UTXOs can only be consumed once, meaning that these seals can only be opened once.

The RGB protocol utilizes this one-time seal based on Bitcoin UTXOs to map RGB state changes to ownership of Bitcoin UTXOs. The Bitcoin system thus ensures ownership of the state of RGB, as well as the ability to trace all state changes through the UTXO history. The one-time seal provides the RGB protocol with double-spend-proof security and transaction branch traceability guaranteed by the Bitcoin consensus.

Client-side Authentication

The RGB protocol contains user state that cannot be verified directly by the Bitcoin consensus, and users must use off-chain calculations to ensure that RGB’s state changes are as expected. Client-side validation technology allows users to validate only the UTXO branching history that is relevant to them and not the transaction history that is not relevant to them. RGB’s state security is ensured through client-side validation and does not rely on any centralized third party.

Blinding UTXOs & Bulletproof

RGB, a protocol for managing assets on the Bitcoin blockchain, incorporates innovative privacy-enhancing technologies to secure transaction details and protect user identities. These include the use of blinded UTXOs and Bulletproofs.

Blinded UTXOs are employed to enhance the confidentiality of the recipient's identity during transactions. Instead of using standard UTXOs (Unspent Transaction Outputs), which are openly visible on the blockchain, RGB uses a blinded version. A blinded UTXO is created by combining the original UTXO with a hash of a random blinding secret. This process obscures the recipient's identity, making it difficult for the payer to see where the funds are going or to track when they are spent in the future. During transactions, the sender reveals the blinding secret to the recipient, who then uses it to prove ownership and complete the transaction verification.

Bulletproofs are another layer of privacy used in RGB to hide the amount of assets transferred in transactions. Developed by Blockstream and used in the Liquid sidechain, Bulletproofs are a type of zero-knowledge proof that enables confidential transactions. This mechanism allows transactions to be verified without revealing the monetary values involved, thereby protecting the privacy of the transaction amounts. It ensures that while the transaction history and ownership chain of UTXOs are visible, the specific values transferred remain concealed.

Together, blinded UTXOs and Bulletproofs provide robust privacy protections in the RGB protocol, safeguarding both the identity of transaction participants and the amounts transferred, thus enhancing security and confidentiality in blockchain transactions.