JFYI there were a plenty of alternatives which can do more-or-less the same: Abe, electrum-server, bitcoinjs-server. So it isn't like obelisk is some unique piece of software.

Electrum uses a network electrum-servers for about a year now.

So you run a local server, which has database and everything, but you call it:


Got it.


No, it doesn't work this way. Have you ever heard about Sybil attack? ( http://en.wikipedia.org/wiki/Sybil_attack )

Lots of servers which are run by anonymous people on the internets won't help you. If you believe that it is unlikely that there will be a collusion among several independent server operators, then you need to be sure you connect to servers which are run by certain operators, and follow certain policy.

For example:

1. Suppose there are 10 servers operators of which are well known and it is believed that they are fully independent.
2. When you check whether Mastercoin transaction is correct, you request information from all of these 10 servers.
3. If less than 5 of them respond you abort immediately.
4. Each response is signed with server's unique private key.
5. If all of response agree, you assume that responses can be trusted and proceed with transaction validation.
6. If they disagree, you abort the procedure and save signed responses.
7. There will be investigation, and servers which produced wrong responses without a good excuse (e.g. well known bug in software) will be excluded from the list permanently.

Why do you think it is a good idea to use obelisk servers as a source of information?

If you query history for an address, you cannot verify whether servers gives you all information.

This means that people who control these servers can easily perform double-spends by hiding send-to-self transactions.

The need to trust servers, is bad, but the bigger problem with it is that you don't know who runs these servers, and so there is no accountability.

No, Mastercoin has features which cannot be implemented with colored coins.

Basically, colored coins takes conservative approach, while Mastercoin is more feature rich (and for this reason will end up with finicky implementation, IMHO).

There are several projects in  various stages of incompleteness.

Here: https://github.com/bitcoinx

Are you looking for something specific?

Investors are only interested in things which brings them profit.

It's very hard to extract profit out of fully open source project. It is theoretically possible, but not easy.

Mastercoin was able to get $600k for development through creation of a new currency.

But the whole point of colored coins is that they work directly with Bitcoin and are not limited in any way, so this model cannot be used.

We already have funding... 200 BTC was pledged by sponsors for a complete implementation:

1. 100 BTC for NGCCC: a client which can be used on desktops and servers
2. 100 BTC for WebcoinX, a web client

It is still hard to find developers!

100 BTC will buy you only 1-2 months of work of North American/European programmer...

But to have a good progress, we need developers who already have in-depth understanding of the Bitcoin protocol and everything which goes with it, and who are qualified to work on project like this. Of course, good devs are already working somewhere, and it's unlikely that they will consider leaving their current work to have 1 month gig. (Cf. J. R. Willet: he didn't abandon his work even though he got something like $600k to develop Mastercoin.)

So there are only people who can work in their free time, on weekends, etc. And, understandably, it doesn't result in fast development.

I think it's worth noting that we already have several implementations which are almost complete in terms of functionality, particularly:

1. ArmoryX: We got it working in January of 2013. It was able to do many things: issuing colored coins, installing "color definitions" from web, p2p trade. It had pretty much everything, except it lacked some checks to make it foolproof. We had to abandon it because Armory requires too much RAM and crashes too often, that basically makes it unusable... Also it is hard to get in sync with Armory mainline.

2. WebcoinX: We got a prototype working on testnet in May of 2013. It could do all things Armory could do, I think. But it is too slow to work on mainnet, and it wasn't secure... But wrapping it as a Chrome extension and fetching data in a different way isn't exactly rocket science. Still, we only got progress with bugfixing and GUI, it's still not ready for mainnet.

3. CCoinDemo is a really compact wallet... Basically, it is a thin layer on top of coloredcoinlib which uses web services and bitcoind RPC API. It's something like hundred lines of Python code.

So, there is no shortage of half-assed and mostly-working wallets, there is a shortage of people who will be committed to making a complete, reliable wallet.

I mean, I do what I can... But we could do it faster if we had more people....

(The last guy who fully understood how it works and was willing to write code disappeared in June... I'm talking about Karel Tuma who was leading WebcoinX development. There were do signs that he's going to abandon the project, so I assume that something have happened to him IRL. If not that, we'd probably already have WebcoinX reasonably complete.)

So now about hope: I hope to complete a basic core for NGCCC in a couple of days. I also found several developers interested in working on this. After we have a good core we can work incrementally.

Yes, there is no clear date.

Unfortunately there was a problem with recruiting developers, i.e. barely anybody was working on this for months, but there is some hope that it will change soon...

We'll probably have something available this month, but there are no guarantees...

What do you mean by "centralized exchanges"?

IBs (or intermediaries/proxies) will assist business with public offers, paperwork and whatnot. I think a good model for it is PicoStocks, and, maybe, MPEx. (But they are bundled with a trading platform.)

Rating agencies will help investors to find worthy securities: they can work with businesses and their representatives to perform audit, independent valuation analysis and so on. In the end, each rating agency will create a list of securities it believes are good.

If we assume that decentralized trading platforms exist, I see what role "centralized exchanges" might have. A security doesn't need to be listed in a specific place.

It can be listed on:

• rating agency's site (it is probably preferred, as rating agencies have strongest incentive to provide proper information)
• IB's site (they have an incentive to promote businesses they work with)
• own site of a company
• on bitcointalk

No matter where user gets information from, he can trade shares of that company using this decentralized trading software.


Who SEC will go after?

Are you aware of model which is used by PicoStocks?

They bought shares of CoinTerra, a private company registered in US, and now as a company registered on Marshall Islands they let users trade virtual shares based on real CoinTerra.

Do you think that SEC has an authority to close PicoStocks?

Proxies are not in any way unique to cryptocurrencies. E.g. Goldman Sachs created a fund as a proxy to Facebook shares when Facebook was private.

Then there is SecondMarket.com:



Look, I'm just making a tool, and I anticipate certain uses. But people will likely use it in many different ways, and it is hard to predict what will work and what won't.

Centralized exchanges are, obviously, the weakest points, in many ways.

It is possible to construct rating agencies (we call them this way now) in such a way that it's pretty much impossible to attack them. You can operate one fully anonymously, simply signing messages like "After performing checks X, Y and Z, I believe that company ABC is trustworthy". How can they shut you down?

Of course, it is always possible to go after individual business. Ultimately, it will be the weakest part.

But if we remove these other weak parts (which were actually unnecessary), it's possible to focus on the actual problem: making it possible for companies to raise capital without violating laws.

It might be possible either through registering companies in jurisdictions which allow that, or using proxies/intermediaries. However, IANAL.

Two weeks(tm).

I think you misunderstood how PicoStocks works: it is a proxy/passthrough of sorts:

It it is a company which buys shares privately (so CoinTerra itself remains a privately owned company), and then sells virtual shares via its platform. They receive dividends as if they were real shares (well, minus fees), but they exist only within PicoStocks accounting system, and you don't become a shareholder if you own these virtual shares.

So you shouldn't be asking whether CoinTerra does an IPO, you should ask them whether they plan to sell shares to PicoStocks.

This construction is well established outside of Bitcoin world. For example, an investment bank (probably, Goldman Sachs) created a fund which allowed people "to buy Facebook shares" when Facebook was still private.

It might be a scam, but you're using wrong terminology.

Dust threshold depends on the size of the output:


It is 5460 satoshis for a typical output, but is larger for your multi-sig one.

.

(This is based on an article which I posted on colored coins mailing list back in June. Since colored coins are mentioned here fairly frequently, it would help if settle on a concrete terminology, and so I'm posting it here.)

EDIT: A more rigorous definition which uses slightly different terminology: https://github.com/bitcoinx/colored-coin-tools/wiki/colored_coins_intro

Previously we were associating term "colored coins" with a concrete protocol/algorithm, called "order-based coloring". Sadly, it had certain deficiencies, especially after anti-dust patch made it impossible to send tiny amounts of coins, and for this reason we decided against standardizing on it.

Instead, I decided to generalize the concept; so "colored coins" is a concept now, not a particular technology. So what is it, exactly?

The core idea is this:

• we are going to associate a property or a set of properties with transaction outputs
• this property can be transferred when these transaction outputs are spent in a transaction, i.e. outputs of this transaction can somehow inherit properties of inputs

So the characteristic trait of 'colored coins' concept is that it uses Bitcoin transaction graph and works on 'transaction output' level.

Let's formalize this:

• color associates color states with transaction outputs, e.g. color X associates color state Y with transaction output Z. Perhaps we can write it down as X(Z)=Y
• color can't be an arbitrary function, it must be defined in terms of coloring kernel, which is a function which can be applied to each transaction in isolation
• coloring kernel is a function which gets a particular transaction and color states of all of its inputs as parameters, and yields color state for each transaction output. Basically, coloring kernel "colors" outputs
• we can apply coloring kernel to each transaction in a blockchain, and if it is deterministic, a certain color state will be deterministically associated with each transaction output in the blockchain
• this also applies to transactions in mempool: if transaction isn't orphan, color states of its outputs can be computed, and they won't change in future

"Order-based coloring" is a kind of a coloring kernel: you get specific coloring kernel when you combine genesis of a color with an order-based coloring algorithm. (In other words, a generic coloring function which performs order based coloring is parametrized by genesis transaction output; and when color's genesis transaction output is provided you get the concrete coloring function for this particular color.)

You can find an implementation of this coloring kernel here (Python): https://github.com/bitcoinx/coloredcoinlib/blob/master/colordef.py#L24

Smart Property protocol which was described by Mike Hearn here: https://en.bitcoin.it/wiki/Smart_Property#Theory
fits into this new colored coin model. And so do many other things which are based on it, e.g. bonds which are marked with a special transaction scripts (see here: https://en.bitcoin.it/wiki/Distributed_markets).

However, Mastercoin doesn't fit into colored coins model, for two reasons:

• it associates balances with addresses, not with transaction outputs
• it uses non-local state transitions. It is sensitive to order, i.e. even if you have exactly same transactions, but they are in a different order, you can get a very different state.

Mastercoin can only be described in terms of a more general model, and it can implement features which cannot be implemented within colored coin model. But since it doesn't make use of Bitcoin transaction graph, it is no longer protected with mechanism which prevent double-spends. I.e. we cannot say anything conclusive about Mastercoin transactions which are still in memory pool, state is fixed only if is buried in the blockchain.

OK, well, so why do we care about a formal model for colored coins?

As it turns out, coloring kernel can be separate from other aspects of colored coin implementation (such as blockchain traversal, for example). Thus we can create a colored coin client which is able to work with several different kinds of kernels, and so compatibility problems are less pressing: to add support for a different kind of colored coins we simply need to include implementation of kernel and implementation of send function.

We can also develop coloring kernels for specific purposes: we are no longer limited to a simple rule of conservation. We can implement advanced kernels which can have interesting features like demurrage, taxation, built-in referral program etc. It is also possible to design them specifically for use in derivative and prediction markets.

(In other news, I believe it is possible to create a fully decentralized prediction market. It is fairly hairy and relies on assumptions of economic nature, e.g. rationality of actors. But as far as I can tell, it is actually viable. Consequences will never be the same.)

Bitcoin protocol supported multi-signature scripts from the start, but we still do not have a usable user-interface for things like dispute mediation, escrow etc.

This clearly shows that having something available in protocol isn't enough. Somebody also needs to build a user interface and infrastructure around it.

Same is true for colored coins protocol: protocol is simple, the trick is to implement a complete, usable solution.

People who develop "existing clients" need to focus on needs of majority of Bitcoin users, they need to implement features which make Bitcoin a better payment system. For example, a payment protocol is currently being standardized and implemented.

On the other hand, there is no reason why I can't make a new, experimental client. If I fail at that, it won't be a big problem.

Another thing is that implementing something in code is actually no different from writing thorough specification. What is code if not a formal specification of how program should work? (Well, you can say that code is too specific, but it really depends on how you write it, e.g. Haskell can be very similar to math notation.)

So I would rather write code and get something working than do it on paper first.

Besides that, colored coins have this property that the core is very simple, but when you actually try to implement it in a wallet, you run into a number of problems.

Also you probably overestimate how hard it is to implement a new wallet... Plazmotech implemented the first version of NGCCC in three days. Implementing a wallet per se isn't hard. It is hard to make sure that it is secure, reliable, fast, etc.

Recently I've been trying to find developers to help me to complete colored coins client implementation, with no success: I'm now working on it alone.

I know that there developers well-versed in cryptocurrencies in this thread, so I'm asking here too.

Brief intro: colored coins can be used to represent ownership of securities or smart property; they can exist in existing blockchain (Bitcoin/Litecoin/Devcoin) and do not require changes to protocol; they do put any data extra into the blockchain they use, and so transactions involving colored coins do not bloat blockchain any more than normal trade transactions; colored coins can be used to implement decentralized exchanges for stocks, bonds, etc

What: We already have several working prototypes, now we need to make an implementation which is actually usable. This involves optimization, improvements to user interface, security-related improvements etc. The most promising implementation now (in terms of what can be completed quickly) is so-called NGCCC (Next-generation colored coin client). It is implemented in Python, has small code base, works together with bitcoind.

Why: Well, people were asking for a thing like this for quite some time, but complete implementation have been delayed for various reasons. (We actually had a fully functional prototype back in January.) Right now, BTCT.co is closing, and issuers are looking for a new home, so it would be nice to offer them decentralized exchange. Another reason is competition from Mastercoin: Mastercoin aims to offer something similar, but is worse in term of decentralization. So I think it's better to complete the good thing until the bad thing takes off.

The deal: I'm looking for Python developers who understand what it takes to implement a cryptocurrency wallet. We need to implement this thing as soon as possible, so I need developers ASAP. There is 70 BTC compensation pool, it will be spread over several milestones and will be awarded to developers proportional to their contributions. I'm also looking for JS developers for another implementation, but it is lower priority. If interested, please PM me.

How is this relevant for Devcoin: OK, since it is a Devcoin thread, I have to explain why it is relevant, so:

• We can discuss colored coins on Devcoin blockchain: I believe it would be beneficial to Devcoin as it will allow Devcoin users to do crowdfunding and whatnot, there is a plenty of creative uses. It won't significantly affect Devcoin blockchain unless becomes wildly popular. However, there might be  a challenge in getting it to work on Devcoin chain, as devcoind is based on old version of bitcoind. (Right?)
• I'm going to request Devcoin bounties (shares) for this project, as it is an important open source project (IMHO)
• Developers can request to be paid in Devcoins (partially), in might be able to pay a bit more (e.g. out of Devcoin bounties), and BTC->DVC conversion can help Devcoin price a bit

At the stage we are at, we cannot make incremental progress. We have something working, a prototype, but to make progress we have to re-arrange things, and such re-arrangements affect overall design.

I cannot say: we need foo, then bar, then baz. Because that's just one idea. Perhaps a talented programmer will join and say: we can do quux and frob instead, and it will be better than what I thought.

If you want to see some list, here's NGCCC overview:
https://github.com/bitcoinx/colored-coin-tools/wiki/The-next-gen-colored-coin-client

And here's WebcoinX bugtracker: https://trello.com/b/n4qoNDDI/webcoinx

But that's pointless. I don't want people to grab tasks to do, I want them to discuss development strategy first.

It's really hard to put a price tag on it, as it depends on many factors.

First, it isn't clear what kind of features is required... It is definitely cheaper to develop simpler software.

But some people absolutely want a web client, and it's messy, we have to make several trade-offs to make it work.

Also, programmer labor costs vary a lot... Hiring someone from California is one thing, hiring someone from India is another.

And we need people well-versed in cryptocurrencies to do this (well, for most important parts), and it's hard to find them available.


Are you referring to something specific?


Well, maybe. I currently have an agreement with a sponsor, they are willing to provide $10000 for a colored coin client. I think it's enough.

But I haven't found programmers who can spend significant amounts of time and efforts. (See my other post.) I talked to some people, but nobody said "I can spend 1 month on this if you pay me $xxxx".

Just as a point of reference, this Spring we had a fairly good JS developer working in WebcoinX, he got something like $2000 worth of Bitcoins for 2-3 weeks of work, and made a very basic WebcoinX. (He was making a good progress.) But then he disappeared in June (I suspect something happened with him IRL).