Bitcoin Forum

http://bitcoinowl.com/sites/default/files/coinprism-wallet.jpg

One of the most exciting technologies that build on top of Bitcoin is called Colored Coins and it launched Today with Coinprism (https://www.coinprism.com), a web based wallet that brings Colored Coins and the Open Assets open source protocol to life.

Colored Coins allows users to take small fractions of bitcoins and add a secondary value to them. In practice this lets people create new assets and use Bitcoin's network to secure and trade these assets. This simple idea opens up a wide range of possibilities.

For example you can start a company and let Colored Coins represent the ownership of the business. Your investors can trade their Colored Coins representing your business easily as easily as if they were sending bitcoins.

Exchanges can create Colored Coins dollars that will represent real dollars and people will be able to send each other these dollars easily to avoid any possible volatility of Bitcoin. Today sending fiat currencies is expensive, restrictive and/or slow. Soon it will cost as little and will be as fast as sending Bitcoins.

Colored Coins can also represent precious metals, property and can be used for marketing purposes by multinational companies that need a frictionless global currency that works online and in mobile apps.

How does Colored Coins affect Bitcoin?

Colored coins make Bitcoin's network and bitcoins themselves more valuable because it adds a significant new functionality.

Widespread use of Colored Coins would have two main effects on Bitcoin:

• Increase in demand for bitcoins, because you have to have BTC in order to manage and send your Colored Coins around.
• Increase the number of small BTC transactions. This will put a pressure on the Bitcoin network, but it will also generate more income in fees for miners.

Read more about Coinprism and receive 1,000 Owl Coins (created with Coinprism) for free. (http://bitcoinowl.com/coinprism-first-bitcoin-based-colored-coins-web-wallet-changes-everything)

Is there a white paper that explains the colored-coins accounting protocol that you can link us to?

EDIT: found it myself: https://github.com/OpenAssets/open-assets-protocol/blob/master/specification.mediawiki

Question:

I'm a farmer and have 100 apples. Am i correct in that I can issue 100 shares for my apples?

When I sell an apple colored coin what happens to the coin when the apple is eaten? Does the time-stamp just act like a receipt?

When the apple is eaten, the counterparty assigns it to another apple or recolors it.

So for clarity, the buyer destroys the coin upon taking possession of the apple? or only after the apple has been eaten?
(edit)
or do they just keep both apple and coin and who cares if the apple has been eaten, we're not buying it back.

The colored coin was an apple future. He exchanged it for the apple.

ok. So when I give the apple he sends me back the applecoin.

What happens next? Do I destroy it?

edit
I want to be honest in representing the number of apples I have

NXT also released similar technology recently called Asset Exchange.  They have virtually no marketing budget so there isn't as much fanfare.  It does work well though.

https://nxtforum.org/asset-exchange-62/how-to-make-your-own-local-fiat-exchange-with-nxt-ae/

-bm

Let's say I want to grow an apple tree. I need money for fertilizer, insecticide, and water. I can supply the seed, the land, and the labor. So to raise money for this venture I sell applecoins* expecting to get a yield of 1000 apples in a season (we have fast growing trees). I sell 100 colored coins to cover those costs and will give each colored coin owner 5% of the yield rounded down to the nearest whole apple and then will offer a discount on apple pie to the applecoin holders as well. To redeem the colored coins for the apples, you must send them back to me.

*screw you Apple, Inc.

Colored coins are IOUs so it is always possible for the issuer to misrepresent the underlying assets.  It's up to you to ensure that the IOUs outstanding is reasonable based on your ability to deliver.  This is not a bad thing, as you may be a very trustworthy apple producer and always honour convertibility of the the apple-IOUs into real apples.  

However, if you suspend redemptions in the future because you were operating a fractional reserve apple farm and there was a "run on your apples," then the value of the apple-IOUs outstanding will fall below the market value of other apples of commensurate quality.  Your customers who were regularly buying apple IOUs from you (effectively futures contracts which helped you pay to grow the apples) may not want to purchase from you anymore and this would hurt your business.  

coinprism is 100% premine right?

Coinprism is only a wallet. You supply the bitcoins to fund your IOUs.

Right--talking about "premine" doesn't even make sense.  The coloring process is a tool that any bitcoin user can use to create IOUs or digital representations of other assets.  It is the "pen and paper" to create the IOUs, not the IOUs themselves.  If you want to create your own IOUs by coloring coins, there is nothing to buy so long as you have a small amount of bitcoins.  

These are not some new foo-coin, they are simply a new way to use bitcoins and the blockchain ledger.  If colored coins become popular, then it will help to increase the demand to hold bitcoins.  


EDIT: coinprism is like a paintbrush for coloring your bitcoins.  Uncolored bitcoins go in (white light) and all sorts of colors can come out:

https://i.imgur.com/ufzL4Ko.gif

it seems the announcement is premature. the site is not working yet

This is huge. This is the "killer app" people have been waiting for. If you aren't familiar with the colored coins concept it would definitley be worth your time to do a you tube search. Make some coffee before you start.

You can technically release any number of colored coins to represent your apples.

If you sell a Colored Coin you're not supposed to eat the apple which is the physical representation of your coins. You must reserve it in case somebody wants the apple in return for the coin.

Yes, if he exchanges his coins for an apple you're supposed to destroy the coin regardless if he eats it or not. Because you don't have the asset to back up the coin anymore.

Colored Coins are 100% 'premine'. Coinprism is the name of the wallet that creates and holds the Colored Coins.

That's a good business model. Especially the Apple pie part. :)

He's not describing a futures contract, he's describing a voucher.  Just use Groupon if you want to sell vouchers

It was meant to start Today, but at the last minute it was pulled to fix a few small issues. I tested it and it works well already. It will be public before the end of this week.

It is a misnomer to even apply terms like 'premine' to coins that have been colored.  The meaning of the color is whatever the issuer decides, so colored coins aren't really even "coins" in the usual sense.  They're more like bearer bonds that represent promises made by the issuer.  The open-assets protocol that Coinprism uses is a way to track the color as the promises are freely traded on the blockchain. 

The issuer of a class of colored coins can create as many as he wants at will.  He could issue 1,000 today, and then issue 10,000 three days later, and 1,000,00 the week after that.  But this is not a problem at all and is in fact necessary, as the color just represents promises.

Open-assets protocol: https://github.com/OpenAssets/open-assets-protocol/blob/master/specification.mediawiki

Colored coins can represent vouchers, futures contracts, or many other things; it's up to the issuer to decide.  Colored coins are unlike anything that has ever existed before.  They allow people to create and trade assets like apple futures contracts, shares in a company, or IOUs for gold stored in a vault, just to name a few.  The open-asset protocol is what allows these assets to be subdivided and freely traded without the need for the issuer to record and account for the trades--the protocol does this for him.  Colored coins will be an exciting addition to the bitcoin ecosystem.   

I understand what colored coins are and they sound cool.  However the apple seller doesn't sound like he wants to write a futures contract.  He wants to write a voucher.

But since his business is a startup Groupon is better for him since they can also distribute the vouchers to their user base so he doesn't need to do his own marketing.

I don't know if he really wants to sell apples or its just an example.

Personally I think its a terrible business plan to secure financing by selling vouchers.  He's better off using a presale model like Kickstarter if his goal is to raise capital.  Either that or just take out a business loan

The other thing to consider is even you can color coins for futures contracts why would you want to?  Most people who trade futures prefer cash setlled and trade them for speculation.  What they care about is liquidity.  If the colored coin transaction takes 10 mins, the market makers will be forced to widen the spread which will make them unattractive for trading.  Plus there's already mature exchanges for futures.  What is the advantage to using blockchain compared to what we have now?

It has the same problems of bitcoins.  Why bother using it when there are superior options like credit cards and ATMs everywhere.  

Problem:
How to determine the exchange between Bitcoin and Colored Coins? As you said, Colored Coins can represent real dollars, so when the currency values ​​fluctuate a bit, how to ensure that the value of Colored Coins?

I think he wanted to understand what colored coins are and used a silly example of an apple farmer selling vouchers for apples.  Cbeast pointed out that by issuing futures contracts the example wasn't silly at all because it actually gives the apple farmer a useful way to fund his crop without involving banks.  



Apple farming aside, you might be on to something.  A promotional site like Groupon could create colored coins on behalf of their small businesses clients and sell/give away the colored coins as vouchers.  It would be trivial for the merchant to verify and redeem the vouchers and it would make the entire process more transparent and probably a better deal for the small businesses.  Consumers wouldn't even know they are using bitcoins.  

This actually seems like a really good idea!



To help fund your next apple crop, of course.

Or to fund the development of your new innovative device.  Instead of conventional "pre-sales" where a company just sits on your deposit, companies could create a sort of pre-sale future contract.  In the case of Butterfly Labs, people could have traded their ASIC pre-sales on the open market rather than being stuck waiting.  This would promote price discovery in the pre-sales market (which has been a problem in the bitcoin ecosystem to this point).  

The more I think about colored coins, the more I like them.  



Colored coin speculators do not need to take delivery on futures contracts they may hold--they would instead trade into cash (bitcoin) at the appropriate time.  For example, a trader may have bought-up Butterfly Labs pre-sales colored coins at a sharp discount after BFL made several delays in the production schedule, expecting BFL to get back on track and the price to go back up (at which point they would sell).    



Liquidity is highly dependent on the size of the market.  Liquidity for BFL pre-sale miners would never be as deep as liquidity for pork-belly futures on the COMEX, but that's not the point.  The point is that the liquidity would be infinitely than not having any at all.  



Trustless exchange of colored coin transactions are as fast as bitcoin transaction (the network propagation time), but on-chain transactions would not be suitable for high-frequency trading like you pointed out.  For HF trading, you would send your colored coins to a centralized exchange and trade them there.  I think it would be several years until there was enough demand to create exchanges for high-frequency trading of colored coins, however.  



Has this thread not made it obvious by now?  You already said "I understand what colored coins are and they sound cool." 

The advantage of colored coins on the blockchain is because you can do things that are impossible to do otherwise!

The free market determines the value of the colored coins.  

Say Bitstamp issues a bunch of BitstampUSD colored coins.  As long as people believe that Bitstamp is solvent and honouring USD redemptions, then their colored coins will trade near par value.  But if something starts to smell funny (like we saw with MtGox in the fall), then the BitstampUSD coins will trade at a discount to real USDs.  

The beauty is the market automatically takes care of this for us, and in fact provides helpful signals (e.g., warning signs).  If we see the price of BitstampUSD diverge from KrakenUSD, it will be a pretty good indication that something is up!  

Ok so when i color some bitcoin, the amount of bitcoin colored is not relevant, right ?
To go back to the applecoin :

If i create 100 applecoin for my apple growing company, can i just color 100 satoshi to trade?
What is the difference if i color 100 bitcoin?


Am i missing something?

The amount of bitcoins underlying each colored coin is irrelevant from the financial perspective--it is only relevant from the technical perspective because without a small amount of bitcoins the miners wouldn't register your trades and the accounting system wouldn't work.  

I am not sure how much bitcoin you actually need to make it work, but I assume it is larger than the dust limit but still quite small.  I would like more clarification here too.  

And since the bitcoins that are colored are still "real" bitcoins, when you redeem your colored coins, you should get back an equal amount of uncolored coins + whatever was promised.  So the value of a colored coin is:  

    Value of colored coin = value of IOU + value of underlying BTC

Ok that is what i wanted to understand.
It might be a "problem" as the value of the dust today may be not so "dusty" tomorrow.

I think it's rather
Value of colored coin = max {value of IOU, value of underlying BTC}
because you can either  use it either as IOU  or spend the BTC but not both

Also, on coinprism the minimal amount of BTC to creat a coloured coin is 600 satoshi,
which is rounded up from the 540 satoshi dust limit

The investor can redeem his coin by going back to the farmer: the investor gives his apple coin back to the farmer, and the farmer makes physical delivery of the apple. The investor is now free to do whatever he wants with the apple (eat it?), and the farmer can either keep the coin or uncolor it.


Yes, this is a very good explanation of how colored coins work.

To summarize, the colored coin comes into existence when the issuer issues it, and disappears when the issuer redeems it for a service or good.

Excellent news! Yet again bitcoin ecosystem grows. Good job guys!

Well thats good.  It works like traditional banking.

But why does it need BTC why not color dogecoin or litecoin?

Someone had better come up with a better marketing pitch or it will fall on its arse. Im guessing colored coins are great. But I just suffered through this whole thread and no offense but I have no interest in colored coins so far. And stop using apples as your example object. Use something that means something to the average person. If you're talking about mortgages or shares or wills then fine but selling apples doesn't take anything to a new level. Plus they contain fructose which is a bigger killer than cigarettes. Again, no offense intended but I took nothing away from reading the thread.

I have a  doubt

Scenario:

I create 1000 colored bonds and sell it.

Q: How the bond holders can verify the total emission and that I don't emit more and more bonds?

Coinprism, are you affiliated with https://www.coinprism.com ?  

Is there a formal publicly-visible mechanism to remove the color from a coin, or is it up to the issuer to keep track of redemptions?

Does the open-assets protocol support coinjoin transactions?  If the answer is "yes," this means that two entities that don't trust each other could trade colored coins for bitcoins without an escrow service.  This would be very useful.  

I was about to answer smugly that "blockchain.info shows if your bonds originate from the original emission or somewhere else". But that is probably not the only or even practically functioning way. What could be?


Network security. Anything else but the largest coin is always at the mercy of the miners of the largest one. (Yes, I know they have different algo, but would still take Bitcoin for now)

Comparing colored coins to traditional banking is non-sensical because colored coins are not money.  Colored coins represent promises, agreements, IOUs, etc.  We have hundreds of years of case law for resolving disputes involving promising and agreements, but now colored coins makes them more transparent and implements an accounting system for tracking them.  



It doesn't.  Colored coins are similar to ripple IOUs, bitshares, Nxt assets etc.  The value comes from the underlying promises, not the method used to "write the contract."  It would be like saying "why are pens useful for writing contracts if I can use pencils?"

The answer is that both pens and pencils allow you to write contracts, but pens are better because ink is more difficult to erase than lead.  The analogy is that since colored coins are secured by the largest single-purpose computing network ever created (70 quadrillion hashes per second), writing your contracts using bitcoin is like writing them using permanent and unforgeable ink.  

So yes, colored coins secured by dogecoin would still work, but there are two weaknesses:

1.  The colored coins are only as secure as the dogecoin network (which will become highly insecure within 8 months (https://bitcointalk.org/index.php?topic=553683.msg6718601#msg6718601) unless changes are made)

2.  Assuming coinjoin transactions are possible with the open-assets protocol, it is advantageous to issue your colored coins on the most liquid cryptocurrency because the assets can only trade in a trust-free manner against that underlying cryptocurrency.  If you issued DOGE colored coins, you would need to use a third-party (e.g., an escrow service or centralized exchange) if you wanted to trade colored coins for bitcoins with someone who you didn't know or trust.  

You can emit as many bonds as you like, but people will see that you are doing so and won't buy them if they don't trust you (and they may start selling the bonds they currently have thereby limiting your ability to sell the newly-issued bonds).  This is no different than how a company can right now issue as many bonds as it likes: what stops them from doing so?  Potential loss of credibility and the fact that no one will buy them unless they are sold at a high discount (larger effective interest rate).  

Colored coins make no attempt to solve the problem of issuer credibility.  If the issuer is a scammer or just a business that got unlucky, the colored coins will lose their value.  The open-assets protocol is just a way to track color and allow decentralized trading of the assets.  

A great offering to the community.  It will provides a pure colored coin model that can be an alternate to mastercoin and others.

Looking forward to seeing the platform evolve.

You can either rely on a trusted third party to handle your vouchers, futures, stocks, etc. which is expensive because you have to pay for their service. Or you can issue them yourself, but then people won't be able to trade them among each other unless you can create paper notes that are as hard to counterfeit as money (or better).

Colored Coins gives you the option to issue them yourself and it lets people trade them among themselves safely without a third party and all this for a few cents. It gives you the best of both solutions and none of the headache.

I really wish they had a better name than "Colored Coins". Some might get it confused with Blackcoin, Whitecoin, etc.

If they represent real dollars than the price is pegged to the real dollars. As an issuer you always buy and sell it at 1:1.

You're right, it's not relevant because the amount is so small. But if you had for example 1,000 colored coins incoming transactions than you can uncolor them and recycle them back to bitcoins. Each transaction is 600 satoshis, so you would have 1000x600 Satoshis or 0.006 BTC ($2,64).

Yes, the dust limit in Bitcoin is now lowered to 540 Satoshi (at Bitcoin v 0.9) from 5,400. In Coinprism it was rounded up to 600 Satoshis. This the amount used to send the transaction and carry your Colored Coins.

It doesn't matter if you send 1 or 10,000 colored coins, you are still technically sending 600 Satoshis to the recipient.

https://dl.dropboxusercontent.com/u/23689/owl-coin-1.jpg

If anybody wants I can send 1,000 Owl Coins as a test.

It's a Colored Coin that runs on Bitcoin network and the Open Assets protocol.

You will effectively receive 600 Satoshis carrying the Colored Coin meta data.

In order to be able to receive the Colored Coins correctly you need to have a bitcoin address / wallet that understands the Open Assets protocol. In practice this means you need to create an account at Coinprism.com and then give me the address it created for you.

Sure, I'll bite.  I created a CoinPrism wallet and was assigned the address: 1DAXAwYFencj3CXWhcjUg6Fvo3JhjRxrev

So are OwlCoins redeemable for anything real or are they just for experimentation? :)


I am still interested in the answers to these two questions:

1.  Does the open-assets protocol have a formal and publicly-visible method for an issuer to remove the color from a coin?

2.  Can colored coins using the open-assets protocol be traded via coinjoin transactions?

Hi iraszl,

Would love some Owl Coins!!  :o

Coinprism Wallet:

1K2PHavCypCg75VENQYKYuV2c5THz6iZ6H

OK, I created my own colored coins called "Worthless Tokens" with ticker symbol WTK.

https://i.imgur.com/tAM85tt.png

But I can't figure out how to send them to someone (for example to bish5555's Coinprism wallet that he posted above).  Any ideas?

OWL Received !!

Sent it.

1. I think so, when you send it to a new address without the meta tag it becomes uncolored (recycled). I think that's what Coinprism does when it uncolors.

2. Sorry, I don't know.

Haha, I will destroy the idea of WTK by offering 0.001 BTC per WTK! :)

I received my OWL too!

I want to test sending both of you some of my worthless tokens (WTK) but I don't seem to be able to.  Perhaps the wallet needs to wait for several confirmations (as I just issued these worthless tokens 10 min ago).  

interesting project, i will watch it.

 :-\

Here is the public information page that is automatically generated when you color coins to issue a digital asset (I filled in the data and provided the symbol for my worthless tokens (WTK)):

https://i.imgur.com/TVifOPn.png


But what I think is missing is the number of WTK outstanding.  I believe it should be public knowledge how many WTK are outstanding, correct?  I'd like to see this here on the information page.  

If someone uncolors their WTK, could the amount outstanding automatically decrement (assuming the uncoloring process is defined by the open-assets protocol)?

the obligatory 0.0001 transaction fee is a bit of a pita for playing around with these colored coins,
which are only 0.000006 each

0.0001 BTC is only four and a half cents ($0.045).  The transaction fee is a deterrent from creating a bunch of spam transactions, so it is a very good thing.  

In a practical setting, the value of the "color" transferred should be much larger than the transaction fee.  The fact that only 6 bits actually got sent is not the point.  The point was to transfer ownership of the digital assets.  

It typically costs over $100 to transfer assets such as shares between brokerage accounts--that's at least 2000 times more expensive than transferring shares using open-assets.  

It's not compulsory by Coinprism. You can send with none, but I don't know how fast it will be sent if at all. We can try sending it with 0.00001 BTC (1/10th of the suggested fee).

You can check this by looking at the Blockchain, as every issuance and transfer are simple Bitcoin transactions.

We will build a color-aware block explorer that will allow you to do just that.

anyway  I can't do anything with my 1000 owl unless I deposit more money at coinprism.
oh well. I wouldn't call it a majour problem, it just prevents me from fooling around with the coins.

Yes, this is our official account.

And, yes open assets is compatible with coinjoin.


You are right, this information can be extracted from the blockchain (increasing when the coin is issued, decreasing when it is uncolored). At the moment there is no easy way to see that information, but we will be building a block explorer that gives various stats about colored coins (like units outstanding).

Congrats on getting the site up and running.  Colored coins are very exciting.  

I couldn't find a donation address for your project.  Do donations sent to http://coloredcoins.org/donate/ help fund work on Coinprism?

Thanks Peter!

That page would not go to Coinprism. If you want to help specifically Coinprism, please donate to the following Bitcoin address 13S5HJP3k4eESAnzv8gJffd2Yr4ath1tm9
Thanks for your support!

I figured that the coloredcoins.org donations might help fund color-coin related projects.  I think it would be a lot better to remove the address you just posted above as it does not seem very "official," and add it to the Coinprism website instead.   

I love this idea, apart from the fact it's the killer app that makes Bitcoin succeed without adding value to my Bitcoin.

foot in the door Adrian...foot in the door...

I'm trying to wrap my head around the Open Assets specification that CoinPrism is using. If I understand it correctly, unlike OBC or POBC ways of doing colored coins, it seems the Bitcoin transaction rules do not actually help do any validation of the transactions. If I have 100 WTK, I can create a transaction which sends 200 WTK and the Bitcoin network will process that just fine, and it would be up to the colored coin software to determine that was invalid, right?

So in the case above, what are the rules about that transaction? Is it just ruled completely invalid? Can I then re-send a transaction for 50 WTK since the previous send will be deemed invalid?

Yes, I had the same questions and I'd like to get this answered too.  Are transactions that turn 100 WTK into 200 WTK still mined but deemed invalid according to the open-asset rules (in which case the original 100 WTK still exist somewhere)?  Or do they somehow become invalid bitcoin transactions and as such are not even relayed between nodes?  I think the answer is the former, but I'm not sure.

OBC and POBC don't rely on the Bitcoin transaction rules either to verify transactions: the Bitcoin protocol has no knowledge of colors, so it's not possible to rely on that.

If you make an invalid transaction, depending on how inputs and outputs are setup, you may uncolor some or all of the coins you are transferring. If that is the case, they cannot be spent again (they have been uncolored, and no longer exist).

If there was such a thing as a color-aware client and miners were running it, it could reject such transactions.

You can check the example at the bottom of the document, it walks though the coloring process.

Okay, that makes sense. The spec is a bit light on discussing what constitutes a valid vs. invalid transaction. Can there exist a valid transaction with invalid outputs, or does any invalid output make the transaction invalid?

If address A has 100 units of color C, and I make a transaction that transfers 200 units of C from address A to address B, what is the result? Does A still contain 100 coins of color C?

Edit: Ah, it appears from the example in the spec that this is a valid transaction, but the coloring would be destroyed by this transaction (similar to Output 9 in the spec).

Color Coins is going to overload the block chain and cause major problems with the core bitcoin features.

-bm

If it were possible to "cause major problems with the core bitcoin features" just by making valid bitcoin transactions, then it would be very easy to attack the bitcoin network.  Think about it.  

The colored coins protocol allows one to issue custom digital assets on the most secure blockchain and trade them for other colored coins or for bitcoin, even supporting trustless coinjoin transactions.  This is big.  

The other foo-coins like NXT that implement features similar to colored coins are at a strong disadvantage:

   1.  Their blockchains are not as robust as bitcoin's.

   2.  It is not possible to trade those assets against bitcoin in a trustless manner (limiting your trading options to people you know or using 3rd party exchanges).  

we had discussed these issues on the BitcoinX list but the Color Coin boosters didn't seem to care.

the number of transactions are going to multiply exponentially according to number of colors and the basic structure of Bitcoin cannot compensate.  Fact is Mastercoin ALREADY had this issue and seems everyone forgot.  Add to this issue that we have several exchanges all running on one block chain(Color Coins, Counterparty, Disastercoin, etc.).  Remember Bitcoin is a p2p network and open source software, there is not necessarily anyone doing disaster planning here.  If we do have a catastrophe, BTC price will suffer a serious long term setback.


wrong.  weve already discussed this.  NXT has the same exact risk parameters as Bitcoin(minus the need to buy expensive hardware).


wrong again.  Someone is building a system by which vouchers circulate through NXT that are tied to dormant transactions in the block chain.  You are guaranteed the BTC and you can exchange the for any other asset in the system.  Also jl777 is working on an exchange technology(you can buy stock in his company, Asset name 'InstantDEX'.

-bm

@bish5555 and @iraszl

I sent each of you one worthless token (1 WTC).  I only have 8 left because I only issued 10.  So these things are rare lol   :D

https://i.imgur.com/TVifOPn.png


I didn't notice that there is a drop-down menu in the "Amount" field on the "Send Coins" tab.  This is where you can switch from BTC to the various colored coins.

If anyone else wants a worthless token, get a Coinprism wallet, post your address, and I'll send you one. 

Foo coins are becoming irrelevant. 

Peter send me a WTK! 13sC6RxsHGkvaUWeyG6X295GHoVXPux8Ug

bluemeanie1:  Hopefully Bitcoin CAN scale, because THIS is the true promise of the blockchain.  Entire industries whose primary purpose is to hold your stocks and bonds will no longer be necessary, which will significantly increase the efficiency of the financial system.

Some other questions:

When I create a colored coin (it gave me an error BTW), how is my description (read contract) and other info about the coin stored on the blockchain?

I know its probably not in the client yet, but WRT the protocol, can I send a small amount of BTC to every address that holds my coin (think interest payment)?

https://i.imgur.com/FhAN04d.jpg

-bm

Interesting question.

If Colored Coins could choke Bitcoin it means the anybody can do such an attack regardless of Colored Coins. I think that's why we have the 540 Satoshi dust limit.

My understanding is that currently there is a 7 transaction per second limit on Bitcoin, that means if you send 5,000+ transactions in 10 minutes it would go beyond the limit. You can do 5,000 transactions for just 0.027 BTC.

1 WTK has been sent to 13sC6RxsHGkvaUWeyG6X295GHoVXPux8Ug!

Bitcoin was not designed to do this.

while some see this as an 'innovation' other see it as abuse.  Lets see what happens when the number of transactions multiplies by a factor of a 1000.

-bm

no your thinking is off.  Color Coins and Counterparty create an INCENTIVE to create many many more transactions that don't have a strict BTC value.

all these discussions already took place on the BitcoinX list.

-bm

Got it, thanks! It's interesting because you sent it to my Owl Coin address and now it's listed under that account. I didn't realize that can be done. :)

People are sending each other all kinds of coins. I got 100,000 USDollars too: https://www.coinprism.com/blockchain/color/34zK2mBo4uQFZ5Daqgb8JngnBNrKgPnKzE Sharing the wealth! :D

You can ask for Gold Colored Coins here: http://www.reddit.com/r/Bitcoin/comments/25lct9/colored_coins_give_away_btcblue/

You mean killing Bitcoin just for the sake of it or to piss off bitcoiners for the price of a few dollars wasn't enough incentive?

I don't believe the description is stored in the blockchain for privacy reasons--there is no need to make information about the colored coins public (other than the fact that they exist).  I think the idea is that open-assets is simply an accounting protocol.  It makes no attempt to enforce or make transparent the promises made by the issuer.

(BTW--I think Coinprism is pulling the information you see about WTK from a URL.)


I believe colored coins and normal bitcoins can coincide at the same address and I think this was done for the reason you said (so that interest or dividends could be issued directly to the address where the colored-coins are held).  

what?

I guess time will tell... we KNOW the number of txs are going to multiply- what's your prediction?  smooth sailing?  are you an active backer of this technology project?

-bm

No, I'm not in any way related to Coinprism. I certainly don't want to harm bitcoin, but the whole thing is an experiment and it should be tested in this way too. We can rely on people not doing projects like Coinprism in order to keep Bitcoin running smooth. It has to defend itself if it's a potential problem.

I don't have a prediction. I don't have enough knowledge. I guess it will work fine.

Exactly.  If colored coins can hurt bitcoin due to blockchain size issues, then bitcoin would be hurt by an attacker anyways.  I hope we do see an increase in the number of transactions thanks to colored coins.  It will motivate discussion about raising the block limit, reducing the orphan cost by implementing block propagation by hash, and floating the miners fee.

Since colored coins uses OP_RETURN to store the metadata, there is also no issue with the UXTO becoming polluted.

many things could happen.  I know for certain the transactions won't be cheap, the miners need an incentive to carry them.  If we continue to have more mining monopolization, then they could hold these networks hostage and charge exorbitant fees.  My primary concern though is if Bitcoin can even handle this sort of thing.  The technology is buckling on the current capacity, now were about to multiply it by 1000?   :-\

the COIN_DUST limit was created to keep trivial transactions off the network, and the response was to hover just about the COIN_DUST limit?  so the devs will just raise it again, pumping more money into the miners.  Why not?  it's going to be a big balagan isn't it?

-bm

Worked, thx!


I think storing a hash of the description in the coin type creation block is very important.  Its how you would take the issuer to court if s/he breaks the contract.


Great!

If you are going to make a statement like "the technology is buckling on the current capacity," you should back it up with some evidence.  

The entire blockchain fits on the tip of a finger with enough space (46 GB free, 18 GB used) to grow for another 1-3 years.  

https://i.imgur.com/jigdrRr.png


Blocks aren't close to being full (and the limit can be raised), bandwidth requirements are acceptable, there are a sufficient number of nodes, etc.  The most unhealthy thing about the network in my opinion is simply the concentration of mining pools.

I am not an expert myself, so perhaps this is the case.  The protocol is described here: https://github.com/OpenAssets/open-assets-protocol/blob/master/specification.mediawiki

Whether this would be a positive or a negative I guess it depends on your view of the role of the protocol.  I understand your concern, but could you not argue that the issuer could just sign the hash of some legal document (with the key he used to create the colored coins) and then time stamp this in the blockchain (or something along these lines)?  It seems to me this could be done only when and as required (rather than forcing it on top of the protocol).

1LK9UZ6ktgxFXZbpwdNVnS3VsF4yzetF4C

My colored coins address for WTK if you have any left. Thanks!
 

One worthless token has been sent to 1LK9UZ6ktgxFXZbpwdNVnS3VsF4yzetF4C  :D

Thanks! I have one of ten in existence. I vow to exploit this coin to the fullest extent.  8)

I have a flat fee contract for my facility so for mining my only (added) cost would be buying mining hardware. So I could generate a color coin to collect capital allowing me to buy a miner, then mine coins and use the revenue from mining to back up the colored coins I gave out?

That sounds like a very interesting way to get me started up as a miner. It sounds far too easy actually. What is the catch?


By the way, if there are still worthless tokens left I created an address as well: 1CcGUZuYwy8okr5hZeLkytwwdFsNwpGC9H I have a feeling these coins will be in high demand in the future  :P

One worthless token (1 WTK) sent to 1CcGUZuYwy8okr5hZeLkytwwdFsNwpGC9H!



Yes, that is one of the exciting uses for colored coins.  An entrepreneur could raise money to finance the purchase of equipment, and then use the revenue generated from that equipment to pay interest to his bond holders, or dividends to his stock holders (depending on how he sets up the colored coins).

The catch is just that people might not trust an issuer of colored coins enough to actually buy them!  The issuer has to earn investors trust somehow.  Perhaps he could start a thread that describes his ideas with high-quality posts, and then just try to raise a small amount of funds at first.  If he deliver on his promises and his bond holders or stock holders make a good ROI, they might invest more on his next larger project.  Next thing you know, he may be able to attract large amounts of funding.  By this time, it would be unlikely he'd ever want to screw over his investors even if he could get away with it because he'd ruin all his hard work building up his reputation and lose his ability to raise funds in the future (in addition to opening himself up to potential litigation). 

Great got my ultra rare WTK muwhahaha!!

These asset exchanges are fascinating, but remember that you still have a single point of trust, the issuer.

An interesting future using either Bitcoin Script, Nxt's Automated transactions or Ethereum's contracts is building simple business logic and then issuing shares for a trustless organization.

Obviously not every company can become a trustless organization, but there are some examples where this is perhaps possible.

Imagine a dice site implemented as a turing complete contract (Nxt AE or Ethereum contract), the shares are issued on one of these distributed exchanges (Coloured coins/Nxt AE) are used to raise funds and the issuer is the automated contract. The contract/dice site then runs the game logic over the chain and all profits are dealt out to the shareholders via the trustless company.

I think this is a bright future, we just need to think outside the box.

So every colored coin transaction is posted on the blockchain also correct?

I created a test asset and did a few transactions.  When I check the "Color Address: 3AeiQacQEKTYdWTWCxBaoscDn56UW4j1AB" on blockchain.info is shows nothing...

I've been thinking about trustless companies too.  It's an exciting idea; however, I'm not convinced they are actually possible (but perhaps I am wrong).  Take the dice site for example.  The dice-game algorithm can be codified and trustless, but where does the server code run?  You can't run a website that processes hundreds of bets per second on the Nxt network, right?  Which means that the site runs on a normal server somewhere.  Which means someone has access, no?

The other thing I don't understand is how a Turing-complete contract running on Nxt could pay bitcoins to share holders in a trustless way.  Wouldn't it only be possible to issue Nxt credits in a trustless way if the contract ran on the Nxt network?

I'm not trying to be critical; it would open up lots of possibilities if it were possible.

Interesting observation.  Blockchain.info doesn't pick up any transactions at my colored coin address for WTK either (33C124f3w4cJNAi3hVjNMhdegUTAcDRzmB).  

If you lookup a transaction where the color was transferred, you'll see that "something" gets sent to an "unknown" address (which is presumable the colored coin address the OP_RETURN metadata) and that the transaction gets mined.  It would be important to verify Coinprism with a method that is independent from Coinprism itself.  

https://i.imgur.com/O40a5YJ.png


EDIT: The unknown output in the colored coin transactions is the OP_RETURN command where the metadata is written:

https://i.imgur.com/A89Ijdy.png

You make a very good point. I think we are probably 5 - 10 years away from running a trustless web server/webapp/website.

However in the dice example, all the logic can be on the chain (See Ethereum) and you can either interact with the dice system in a direct way (send coins to the address with an encoded bit declaring the odds you intend to 'roll' at or you can interact through a front end for the trustless contract. There could be hundreds of websites providing a front end to the raw contract.

You have two options, interact with the company directly through the chain sending money and small amounts of data directly to the contract) or trust someones front end to do it for you.



This is a good point too. I am invested in both Nxt and Bitcoin (and soon Ethereum).

The way I see it is this: The contract will be in nxt for a nxt dice site, so you won't be able to use bitcoin as it's not native to the system. (I have heard that it may be possible to make a contract handle alternate currencies, I think Vitalik said one day Ethereum could become a "off the chain" transaction service for bitcoin in a trustless manner.

However, what I am hoping for is that Nxt and Ethereum prove that a turing complete language is a good thing and it then spurs the Bitcoin developers to think about upgrading Script to allow for this.

Got my worthless token. There are 100 now ;-)


Yeah, that's the catch for standard investments too. Also, though I have a flat fee contract there is some fair use clause in the contract. So I'm not actually going to set up a huge farm here. Just the idea of funding a business like this is very appealing to me. It's probably also very appealing to all the scammers out there, so as always, investor beware!

I might put some miners though

Is there anyway to track colorcoin transactions via Bitcoind?

For example if you want to setup a bitcoind wallet to handle only a specific coin color asset?

Interesting idea. I'm not sure it it really puts bitcoin to whole new level but good luck developing it!

@Peter R

respectfully request a rare WTK if some remain...for testing purposes :)

18fi8sqAkL8JxfAScVK6inv5F1vFw8HCUD

nm created a token, this is interesting.

-------------------------------------------

very excited about the potential of colored coins.

Hello,

like everyone else i'm confuse with coloredcoin but start to really study it, thanks for your website it's look very nice and easy.
few questions :


Can we imagine a multisign wallet for the issuer of coloredcoin ? I guess with a certain form of organisation it's can help to etablish a trust.

Can we imagine make a token for a multisign wallet private key ? (i'm really not sure about this question xD)



Or do their is anypossibility offer with your coloredcoin that's i don't understand ? If think your understand what my point is with the first 2 questions.

Behold

https://www.youtube.com/watch?v=TkZFuKHXa7w

The UI sure looks neat.

However I'm not sure how Colored Coins do compare to its multiple competitors like Mastercoin, NXT, Counterparty, Ethereum and so on.

I'm watching it with interest.

ya.ya.yo!

One worthless tokens (1 WTK) has been sent to 18fi8sqAkL8JxfAScVK6inv5F1vFw8HCUD!

Bitcoind is not "color aware" but I suppose an add-on could be written to do exactly what you suggested.  The website, http://coloredcoins.org, has a list of the current wallet projects, although I'm not sure if the list is exhaustive. 

At the moment, only coinprism is compatible with open assets. We plan to make a tool that act as a layer on top of bitcoind, that can let you use colored coins without having to use a third party.

I think what is confusing to many people is that "colored coins" are not a new alt coin.  The coloring technique is a free and open-source way to turn small amounts of bitcoins into IOUs, shares, vouchers, etc.  Colored coins can co-exist alongside regular bitcoins at a particular bitcoin address.  

You can't buy "colored coins" in the general sense.  But any given person can color a very small amount of bitcoins to create a specific instance of a colored coin.  For example, I created 10 worthless tokens (WTK).

The benefit of creating colored coins that exist on-chain is (a) they can be traded for regular bitcoins in a trustless manner using coinjoin, (b) they are secured by the most powerful single purpose computing network ever created (the bitcoin network).  

Awesome!

Coinprism, if you don't mind me asking, what is your team's business plan?  Obviously, www.coinprism.com was a lot of work and now all bitcoin users can use it for free (not that I'm complaining!).  Is this just something you guys are doing to help bitcoin and because you are interested, or is there some smart way to monetize related services somehow?

I am still a bit confused about this.  If I transfer 1000 shares of ABC stock, will the underlying bitcoin transferred be 0.000006 or 0.000106 including the transaction fee.  I would think the transaction fee needs to be included.

Here is an example of a colored coin transaction. 

https://i.imgur.com/O40a5YJ.png


I think the 6-bit input from 1MdTq is the "colored coin" and the other input is the uncolored bitcoin "fuel" that makes the transaction work.  You see that there are 4 outputs: two 6-bit colored coins, change, and OP_RETURN metadata. 

One of the colored coins got sent to 1CcG, the other was returned as "colored coin change" back to 1MdTq.  Since all colored coins are 6-bits, this required borrowing 6 bits from the uncolored bitcoin fuel.  100 bits was also paid out of the fuel as a transaction fee, and the rest of the uncolored bitcoins were returned to 1MdTq.  The OP_RETURN logs metadata to the blockchain that records the accounting for how the "color" in the input colored coin was split up into the two output colored coins. 

https://i.imgur.com/A89Ijdy.png

I was already amazed by the testnet version, so all I can say: gratulations and awesome stuff! ;)

Dude I can sell you one but they are really really rare so it would cost you.   ;D

Interestingly you could create "colored coins" that are backed by a fiat currency.  No fluctuation.  So in a way you can create virtually any alt coin you want. Correct?  The mechanics of are just different. 

I pay you $50 for x colored coins where each colored coin is basically a note or iou for $50.  You can then redeem that token and get $50 back; it could even have interest applied.    This is my assumption at any rate.

Can colored coins easily be used as credit in another environment such as in a game?

We are using colored coins to create an IPO of our e-commerce business, since it gives a lot of control to us and no fees as oppose to using mastercoin or havelockinvestments.com and cryptostocks.com.  Look here: https://bitcointalk.org/index.php?topic=609682.0

I don't think people would make the switch to from bitcoins to ethereum, nxt, mastercoin and other crypto 2.0 protocols just because although they may be innovative, there is not much incentive to make the switch.  I could be wrong, only time will tell.

It's still centralized if you need a webbased wallet. Basically all underlying assets would be hosted on your servers. So my question is, is there or will there be a download wallet so people can keep and manage funds from their own computer?

Coinprism is, AKAIK, the first wallet implementation of the open-assets (colored coins) protocol: https://github.com/OpenAssets/open-assets-protocol/blob/master/specification.mediawiki.  They mentioned earlier in this thread working on an add-on for bitcoin-qt in the future. 

Colored coins are not centralized.  For example, I could send colored coins from my Coinprism webwallet to a cold-storage address that I created offline.  Your colored coins cannot be spent without your offline private key. 

But you need to be very careful.  If you import your colored coin cold private key into a non-color aware wallet you could accidently uncolor your coins.  You'd have to go back to the issuer to ask for new colored coins and perhaps he'd give them you since you could prove that it was you who destroyed them. 

That would be awesome.  For example then coin colors could easily be added to exchanges etc...

P.S. Very nice website/wallet you guys have developed here.

This is very cool...even being mostly n00bish on bitcoin all the way around I can see a number of possibilities here. I set up a wallet also to try this out and understand it better if the WTK is still available for testing.

1Q5uQbo73YrPgHx2NvkycuoVyMNsFuZZgG

If so, thanks. If not, no harm...I'll hang onto the wallet for awhile and see how this shapes up.

Now questions.

1. Do we need multiple wallets per multiple transactions as is suggested for btc holdings even if the color coins aren't "worth" anything on their own and are serving as vouchers in kind?

2. If I'm understanding this correctly, it's possible for Company B to issue public color coins as shares, for example, at whatever price, say $50. So the general public could pay Company B $500 and receive 10 CompanyBCoins, and trade or potentially profit the more successful Company B becomes? And the shares then would be valuated according to what - the company itself and if so how is it measured - or the bitcoin market rate, or both/other? I may be blurring things between getting btc on the exchanges and trading, and the scenario mentioned previously about the mining equipment and raising capital.

3. Could this be implemented similarly to the person who suggested the truly awesome votecoin?

4. I'm taking color coin literally so how are these color codes distinguished between people who choose the same color? (don't even...you're the one who's calling it color coin!)

5. I do agree that before the platform gets too popular, maybe consider a more sleek, techno name and keep color coin as a description. I agree the color coin is too easy to mistake for alt coins and this may be an unnecessary barrier to its adoption or getting people to stop and actually go through the information.

6. In the example on coinprism site about buying and selling things like cars and houses, I'm not real sure how that actually works in a practical sense. The example was Joe Blow sells the car to John Smith, JS pays JB the money and JB signs a transaction on the blockchain - basically it's done via the network but at least in the USA, there is more involved to it than that...titles, in particular, purchase agreements, and so on and in some cases the property transaction has to be notarized and there's all kinds of paperwork required by law. Most people will follow that law regardless so how does this overcome those problems?  If I sell Joe Blow a lawnmower, he pays me in btc, cool...end of it. But anything like property, houses, vehicles, boats and whatnot this isn't going to work other than an extra step.

7. At the end of the day, is this basically crowdfunding with tokens?

I'm sure I'll have more questions but this is good for a start :)

One worthless token (1 WTK) has been sent to 1Q5uQbo73YrPgHx2NvkycuoVyMNsFuZZgG!  You should see this in your coinprism wallet, but you'll need a small amount of bitcoins to issue your own colored tokens or move them from address to address. 



Colored coins and regular coins can co-exist.  For example, I could have 0.02 BTC, 1 WTK, 100 OWL and some other IOUs at 1 specific address.  The thing people need to be careful of is that most wallets are "color blind".  What this means is that if you load the private key for an address that contains colored coins into a normal wallet and spend some coins, the transaction might "uncolor" the coins. 

Coinprism is color aware so it can send all colors of coins as well as regular bitcoins. 



The shares would be valued by the free market.  It is confusing right now because colored coins are so new.  But eventually, there will exchanges set up where people can trade various colored assets.  This will allow for transparent price discovery. 

Of course you are also free to trade your colored coins privately with whoever you like, perhaps using the market rate on an exchange as the price. 



I'm not familiar with vote coin, but colored coins would allow share holders to vote in a trustless and decentralized way.  Each colored coin would give a share holder 1 vote. 



Lol, I was discussing this with someone else today too.  The idea of "color" is just an abstraction to indicate that the 60 bit tokens have been "market" in a unique distinguishable way.  There are 1461501637330902918203684832716283019655932542976 possible colors so we won't run out!



I agree that it is confusing, but hopefully it sorts itself out.  The problem is that "colored coins" is a noun but really what we are usually talking about is the action of coloring (a verb).  We color (verb) bitcoins to create new tokens that have some sort of meaning.  For example, the coins I colored to create WTK have the agreement that they are just worthless tokens!



I think some people are just imagining a future where we can register and trade assets directly on the blockchain.

But already we can create legal agreements with colored coins.  Many people think that only formal contracts written by lawyers, signed in ink and witnessed by witnesses are legal.  But this is not true.  Even an agreement written on a napkin is legally binding if both parties understood and intended to enter into it.  We just use the formal contracts, ink signatures and witnesses to make it more clear and proveable that an agreement was actually made. 

But now with colored coins and digital signatures, we have a new tool to make agreements in a way that both parties can prove that the agreement was actually made.  We don't really need notaries anymore, and the role of lawyers can be scaled back too.



That is one application, and there are many others too.

I refuse to put one satoshi in a wallet that's not mine.
Until they fix this, I am not interested.  But once that's fixed, then I'll be all over this.

You can already accept colored coins to a paper wallet, for example.  You just can't move those colored outputs without a color-aware client (or issue your own tokens). 

Note that the open-assets protocol is public so you could "fix" any problems that you perceive.  We are lucky that people are moving projects like this forward and then making them available to the bitcoin community.  On that note, I don't see why Coinprism couldn't charge a fee to allow you to issue colored coins through their wallet service.  Right now, the only alternative is to write your own client! 

I can see governments and the banking cartel short circuiting over that one...  ;D

Thanks! Received. Who was doling out owl coins? :D I'd end up collecting coins! It'd be so nice to get in on the ground zero floor of something that actually takes off for a change. I hate that I didn't know squat about btc until a month and a half ago. But to be fair, I doubt seriously I'd have invested anything in a virtual currency for 32c.




Got it. So basically before sending anything from that wallet with multiple things in it, I'd need to move the btc out to a normal one first?



Yeah, that's basically the idea. There was a thread on here somewhere I read a few weeks back where someone had raised the possibility or was already working on a vote coin - not sure if they called it votecoin or not - that used the bitcoin platform as a voting mechanism that couldn't be tampered with, rigged, etc. so all votes were counted, tallied, and kind of revolutionizing elections, which I'd get behind in a split second if I hadn't already gotten behind it a split second after I read it in that thread  ;D



 :o

Now I see why they just went with colored coins! But I still wanted blue ones!!



Initially, I figured alt coin but the more I read, the more it seemed like a labeling layer - and that being said, I still have no clue how to read the blockchain properly so there's that...




Thanks for the explanations!

It cuts both ways trusted company's can issue there own money (coloured coin tokens) redeemable for a fixed service or product.

Money becomes the domain of the producers not the banks - Hayek's private money dream is realised.

Creating bitcoin put and call options with colored coins

I think it is possible to create put and call options for the USD/BTC price with low trust requirements using colored coins.  

Here’s an example:  

You might want to buy a put option to hedge your downside risk on the bitcoin exchange rate.  Say the price of bitcoin is currently $450.  You buy an option to sell Counterparty A a certain number of bitcoins on July 31, 2014 at $400.  If the price of bitcoins is less than $400 on July 31, then obviously you exercise your option and sell the coins to Counterparty A at $400  / BTC.  If the price is higher than $400, then your options expires worthless.  

Now here’s where the idea gets unique:  Rather than settling in dollars, if the contract is written for settlement in bitcoins, then it would be possible for Counterparty A to prove that they are adequately capitalized to settle put options in bitcoins rather than dollars.  A reserve of bitcoins spendable with the same script used to issue the colored assets automatically become the proof of reserves.  

So now Counterparty A has shown they have sufficient reserves to make good on the put options.  Next, we must somehow force transfers from the reserve address to the outstanding colored coins, should the puts expire “in the money.”  I don’t think this process can be entirely trustless because we need to agree on the bitcoin/USD price; however, I think by using multisig with keys held by neutral third parties, that we could at least make it completely transparent.   Any fraud should be obvious and provable.  

There is one “catch” of course:  The reason you buy a put option in the first place is to hedge your downside risk.  But if the price of bitcoin completely collapses, receiving settlement in bitcoins would be impossible since they would no longer have any value.  I don’t think this is a show stopper, but it would mean that the put options would be able to settle in bitcoins for all values of bitcoin greater than, say, $100 / BTC.  The floor price could be made lower by increasing the bitcoin reserves held at the colored coin address.   Put options with lower floors would be more valuable.  

I'm thinking more about these multisig colored coins with associated bitcoin reserves (i.e., reserves that are spendable with the same script used to create the colored coins).  Since the asset address (for the colored coins) is the hash of the output-script used to create them, I see no reason why the output script can't be multisig.  This means that it should be possible to create colored assets such that re-issueing more requires, say, 2 of 3 signatures:

https://i.imgur.com/CDhmDo7.png


My next question is, is it possible to send regular coins to the colored asset address and then transfer them out using the same multi-sig rules used to create the asset?

As an experiment, I tried to send coins to the Worthless Token address (33C124f3w4cJNAi3hVjNMhdegUTAcDRzmB).  Blockchain.info wouldn't let me but Coinprism would.  So now there's 100 bits sitting there.  

When I look at the address in a blockexplorer, it implies that 33C124f3w4cJNAi3hVjNMhdegUTAcDRzmB is the same address as 12Vz6XAcPAHvH11caQ4mw5GiXxAT4YR7kZ.  Can anyone explain this?  For example, is it possible to spend that 100 bits sitting there?  What would the private key be?


https://i.imgur.com/A26xkOw.png

any comments on this? http://www.reddit.com/r/Bitcoin/comments/25pax6/coinprism_colored_coin_metadata_great_use_of/

colored coin metadata stored on sidechain , instead of main blockchain or server

PM me if you can

You may not to have the risk of settle in bitcoins if there exists a USDCoin token.

Would this work:
1. Assume another party (e.g. Fed or whoever) is running USDCoin, issueing USD tokens which they guarantee is redeemable for cash.

2. Assume an oracle service (also another party) which will be known to sign the transaction given that a script (could be in the metadata) evaluates to true, in this case BTCUSD < 400 AND date >= Jul 31st.

3. Create 3-of-3 multisig address with you, oracle service and Counterparty A. With this address as the input:
a. All of you sign an NlockTime transaction dated August 2nd, transferring 400 USDCoins to CounterParty A. CounterParty A gets to keep this transaction to broadcast if the option is not exercised on by August 2nd.
b. Both you and counterpartyA sign a transaction containing metadata condition "BTCUSD < 400 AND date >= Jul 31st", which the oracle will sign if is true, giving you 400 USDCoin and CounterpartyA 1 BTC.

4. Counterparty A, knowing that they can get the money back using above transaction if option is not exercised by August 2nd, constructs and signs a transaction with SIGHASH_ANYONECANPAY and the outputs:
a. to the multisig address sending 400 USDCoin (they would sign an input for this one)
b. to their own address containing the price of the put option.

5. You take the transaction above, add your input to pay output b as the price of the option, and broadcast the transaction. This will put the 400 usdcoins into the multisig address.

6. Come Aug 1st, if BTCUSD < 400, the oracle service will sign the multisig transaction in 3b for you and you can get 400 USDcoins. If you don't redeem by Aug 2 then CounterPartyA can just redeem their USDCoins.

This would not require you to trust counterpartyA, but would require trust of USDCoin's issuer and also the oracle service. Since both of them are (hopefully) large and unrelated to CounterPartyA and run a business by taking fees, they should not have interest in cooperating with either you or the option counterparty.

If you had colored-coins issued by the Fed ($-tokens), a lot would be possible.  However, that is not going to happen very soon if ever. 

My proposal above creates a tether to the US dollar in a way that minimizes counter-party risk while operating entirely outside of the traditional banking system. 

It's unlikely the FED does anything like this, but a company could easily do it, by either accepting USD deposits and issuing USD-coins in exchange, or simply allowing people to deposit BTC, convert it at the Bitstamp rate, and in the backend, convert the BTC to USD in order to cancel out the exposure.

But isn't CoinPrism just centralizing the Bitcoin coloring aspect? I mean, when people started discussing the idea of colored coins, I thought they were referring to adding a color field to the distributed ledger somehow.

I expect we will see USD-tokens in the not-so-distant future from credible third-parties.  I think these will be useful, however, they still have problems, for example:
   (a) the issuer cannot easily prove his reserves of USD,
   (b) the issuer cannot easily post a "proof-of-intent" bond that acts as reserves for settlement of the options contracts.

The USD/BTC put/call idea with settlement in bitcoin could allow one to hedge against the BTC/USD exchange rate completely outside of the traditional banking system and with 100% transparency.  The counter-party risk, although not zero, can be made very small by using colored coins + multisig with neutral third parties + proof-of-intent reserves.  

There is no need to agree on the going rate when using PUT options, if the options are actually settled (and not contract-for-difference). I don't know which kind of options the market participants would prefer, but every time I offer to issue PUTs, I want them to be settled in an actual trade at the strike price, or expire worthless.

Building a synthetic derivatives market on top of something as fickle and easily manipulated as the USD/BTC exchange rate is a call to even more short-term manipulation and volatility.

You bring up a good point.  I too wonder if this would increase or decrease volatility.  The fact that everything is fully transparent might help to mitigate whales from painting the tape near options-expiration dates.  I don't know what would cost more: painting the tape or making a few more bucks on the options.

What I'm trying to do here is brainstorm the lowest-risk decentralized method for hedging against the USD/BTC exchange rate.

Futures (forward contracts) need to be in place before you can build an options market upon them. Just check the gold/silver market in Nymex/Comex.

If you want to decrease volatility, make a market with options that will be settled in the underlying (BTC) instead of $, and no "settlement date", only "expiration date" (I think this is called European style options but not sure). So the counterparty may exercise the option any day. Then it becomes counterproductive to paint the tape eg causing a flashcrash: with a CFD, you would profit, the lower it goes. With a real PUT option, you need to sell your stuff at the agreed price and buy back, which causes buying pressure in the market (first you need to sell to cause the cascade, then you sell the BTC amount in the PUT option you bought, and now you'd need to buy both of these back cheaper, to realize any profit.)

Ah, decentralized. That is the tough point :) I would start by removing the USD/BTC exchange rate from the system still, because that is the easiest to manipulate and in a sense the least meaningful part. You either have the coins or not.

I'm not sure if this is considered on or off topic but asking anyway...mainly about the insertion of other information.

Is it already possible to add information other than just the value part?

To clarify, I'm wondering about why this isn't or couldn't be used to replace the way we do email...but then would that make the email or message be visible?

How does it work to include information or contracts or anything like this - colored though it is - from one to another?

Arrrgh I know what I'm trying to ask but apparently it's not coming out right.

I dont get this..

American Options can be exercised at any time up until the expiration date, while European Options can only be exercised at the time of maturity.





have you seen? :  http://www.altchain.org/?q=whitepapers/paper4.html

a basic and very simple way to introduce hedging into the block chain is just allow for credit instruments (http://www.altchain.org/?q=whitepapers/paper3.html).  If you are long on the cryptocurrency, you loan- if you are short, you borrow(and exchange to another).

-bm

BTC is starting to play catch up to Ripple.

Think of colored-coins/open-assets as an accounting system for digital IOUs.  For example, a company could write a contract for a bitcoin-bond that pays a monthly coupon of 0.5% of the bond's par value, with a maturity date of June 1, 2015.  The company would then use a single bitcoin transaction to create, say, 1,000,000 colored coins to represent this bond, and embedded the SHA256 hash of the contract within the blockchain with the same transaction.  

If the company is deemed credit worthy by the market, investors will purchase these bonds to earn the interest payments.  The company will use the bitcoins to fund development (for example).  This allows smaller companies to take advantage of the same funding opportunities (bond issuance) of much larger companies.  

But the real beauty of colored coins is that investors can subdivide their colored coins (bonds in this example) and trade them as they see fit in a trustless manner.  The issuer doesn't know who actually holds the bond, but he still knows where to send the monthly coupon!  When the bond expires, the issuer doesn't need to recall the bonds or anything--he just pays out the par value to the bitcoin addresses that held his bonds on the maturity date (as defined by the original contract).

Colored coins therefore only have the value that the market gives them (which is in turn based on the creditworthiness of the issuer).  Bitcoin just solves an accounting problem with colored coins.  It doesn't do anything to prevent issuers from failing to deliver on their contracts because it can't solve this problem.  But it does make the process more transparent and open.  

we've also discussed elsewhere(Peter doesn't seem to be into addressing those points) that carrying such transactions on the block chain poses significant risks- to 1) the holders of the assets 2) the issuers of the assets 3) all the holders of bitcoin.

so before we get overwhelmed with the wow factor of color coins promises, these risks need to be examined.  I think at this point that the stakeholders in Bitcoin are concerned that alternative platforms are looking far more attractive, so are perhaps overly eager to incorporate these things at the risk of systemic issues.  Note also that NXT does all the things Peter mentioned.

NXT, for instance already has a short sale window, a working decentralized exchange, even a silver broker.

-bm

Colored Coins Issuer - Farm Example

Example Situation:

• I have land I can lease to growers
• I want to issue colored coins as stock for ownership of the land
• I create a corporation with 10,000 shares and each share is represented by one "farm coin" (colored coin)
• The business plan would be to lease the land to a grower and the revenue from the lease would be distributed to the share owners in proportion to the number of farm coins they have
• To distribute the revenue I exchange the USD for bitcoin and send it to the addresses where the colored farm coins reside

Questions:

• Are there any fundamental misunderstandings on my part in the example situation above?
• What if a share owners claims to have lost their private key for their colored coin wallet?
• Can a lost colored wallet be verified? -I assume not...
• Can the issuer issue new coins to the lost wallet share holder?
• Can re-issuance of lost farm coins be done in a way that is fair to the rest of the share holders who would see the issuance of more farm coins as potential dilution of their equity in the farm?
• What if someone who lost a lost private key "finds it" after being issued more farm coins? Is their a way to prevent those old farm coins from representing a share of ownership after replacements are issued?
• If lost key = lost equity, how can I prevent from sending future bitcoin revenue to dead wallets?

What you described is a valid application for colored coins.  The only thing I don't like (and it's not really your fault) is calling them "farm coins."  I think "farm shares" is better because these shares are just riding on top of bitcoins that have been colored.  I don't want people to think of bitcoins that have been colored as "new alt coins" because it's not really accurate--they're not really coins at all anymore.   


Since colored coins can be traded freely beyond the oversight of the issuer, ownership of the shares is proven by signing a message with the private key that unlocks the bitcoin address where the colored coins are located.  If someone purports to have "lost" his private key, how can the issuer know that he ever had the private key at all?  He might have just scanned the blockchain for an address that held farm shares and then came to you with a fake story about losing the keys. 


What can be verified is an accidentally-destroyed colored coin.  For example, if I hold 1000 of your farm shares as a colored coin at bitcoin address 1MyAddress, and if I use a non-color-aware wallet to make bitcoin transactions from this address and accidentally destroy my colored coins (remove their color), this will be a provable blockchain event.


The issuer of the colored coins can, at any time, issue as many additional tokens as he chooses (assuming he retains the private key).  In the above example of the accidently-destroyed shares, I don't see why I couldn't go back to you as the farm owner and say "I destroyed my colored coins and here's proof," and request that you re-issue me my shares (perhaps with a hefty fee to motivate me to be more careful in the future). 


Issuance (and destruction) of coins is always transparent.  For example, by scanning the blockchain, the total number of outstanding tokens for any particular asset type can be determined.  Earlier in this thread, Coinprism said they are working on a color-aware blockexplorer to do exactly this. 

"Fairness" is outside the scope of the open-assets protocol (colored coins).  However, if an issuer of colored coins breaks his contract, the shareholders may have blockchain proof of this fact, and could sue the issuer.


Unless the issuer also knows the human identities of the shareholders (which defeats the purpose of colored coins), I don't see how you can really solve the "lost key" problem.  Decentralized trading of colored coins only works because asset ownership is proven by ECDSA signatures. 

Management of your private keys is critical!


Because you can't prove that the key was lost, I think the contract you (as the farm owner) wrote when you issued your farm shares would require you to send the dividends to all share holders (even those you think might be "dead.")

That being said, I don't see why your "issuing contract" couldn't have a clause that allowed you to swap "old shares" for "new shares" under certain conditions.  If the contract allowed, you could announce that 1 year from now the old shares will no longer be valid.  Existing share holders can swap their old shares for new shares anytime between now and one year from now.  Any shares not swapped after one year would be worthless.

I have more questions regarding the farm share argument. I really want to know as I am in an agricultural community that grows large portions of its own veggies and might benefit from this. So in this example.

My area farm share program works with 10 small farms and helps with marketing and delivery. They each sell shares of their crop. Each issues 50 shares. These shares will all be similar with similar veggies but not exact as this is farming after-all. The farms all agree to sell shares at the same price. Everyone sells out. Farmer Brown just happens to make the best carrots. His carrots are much sought after; everyone wants them. However he still sells them at the same price as everyone else. Delivery on the shares isn't for 2 more weeks.

Some of the owners of Farmer Browns shares know that there is big demand for his carrots so decide to sell his shares to make profit. Since there is still 2 weeks before delivery of these shares, how would they go about selling these?

What is the best way for them to do this?

I assume I list the initial shares on my area farm share website. Past that how would anyone know where to go to find shares for sale?

Are there any tools to list or search for shares of Farmer Browns crop that are for re-sale? Or does there need to be a third party ebay or ticket scalper style site?

Is colored coins the best system for this? Would counterparty or mastercoin work better? Or Nxt?

Thanks

there are already TWO websites that feature the assets on NXT,

http://cryptoassetcharts.info/

http://www.nxtdex.com/

and another one is coming online very soon that has very nice features.

in the case of Farmer Brown shares(or any of the growers) the price of his shares will float on the exchange according to demand, so if he has a good product his shares will be valuable.  If he knows the demand is high, he can price them accordingly and make more personal income.

currently no one is curating agricultural assets specifically, and that would be a good idea for a web site!  People would be able to purchase your shares worldwide(even speculate on them).

I think you would fit into the NXT community quite well IMHO.  We have one person who made 'The First Decentralized Oil Painting' and you can buy shares in it, eventually the shareholders will vote on where it hangs.  It's called NXTDrop.  I own a few shares. :)

-bm

So now there is Mastercoin, Colored coin, and Counterparty all on the bitcoin block chain making colored coins.

And NXT, Ripple, and Bitshares making colored coins possible on their own chains. 

I see how it is cool, but basically it is IOUs from a party you don't really know.  This is a hard sell.  I am not saying it won't work, but there is a lot of competition now and all are clamoring for the same clients, who are actually few in number. 

This might all change.  Somebody had to be the first person to use a computer, or smartphone, or bitcoin.  To me, all of those seemed like common sense.  As for colored coins though, it seems like Ripple has the best model by far.  And it is far from doing well. 

It's not always an IOU, they can be used to delineated other things like smart property, shares of a company, tokens, coupons, anything really. They don't have to be a 'currency'.

a new Asset Exchange Explorer was released today:  http://nextblocks.info/#section/market

you can view the assets here: http://nextblocks.info/#section/assets_exchange/14347250558295845059

-bm

The major flaw in NXT, Ripple, Bitshares, Mastercoin and counterparty is that they require people to buy a separate currency from Bitcoin. Bitcoin is by far the most used crypto-currency today, and also the most liquid. It is a risk to go and buy and alt-coin when your objective is not speculation.

Bitcoin simply doesnt offer the possibilities that other platforms such as NXT do.

-bm

Who is trying to sell anything?  There is nothing to sell!  Coloring coins is a process and Coinprism is a tool.  If you are a bitcoin user you can already use colored coins should they be useful to you.  All it really is is a trustless accounting system for "user-defined tokens."

Patrick Byrne (Overstock CEO) mentioned in Amsterdam that he would like to have Overstock assets trade in bitcoin space in addition to on the NASDAQ.  Would you trust colored-coin assets issued by Overstock?  I probably would.  Would you trust colored-coin assets issued by a Newbie with an activity level of 2?  I probably wouldn't.  Would you trust colored-coin assets issued by a promising bitcoin start-up looking to raise money?  Well, if I knew and trusted the management and if I believed in the business model, then I might.  This could in fact be a new funding mechanism for bitcoin projects.  

Coinprism: if my business has 3 executives, can we create a class of colored coins that requires signatures from 2 of the 3 private keys in order to issue shares?

the basic problem isn't in the signatures, it's in the security of the block chain itself.   -bm

I tried today issue my first shares for testing but I am only get "Unnamed colored coins". Anybody else have problem like this?

What is the purpose of colored coins?

Official thread here: https://bitcointalk.org/index.php?topic=517139.0

Colored coins is a beautiful concept