Since ERC20 tokens appear to be the main reason why Ethereum has taken off this year, I was wondering what optimizations could be made in designing a blockchain that simply facilitates transfer of tokens. No smart contracts, no mutability, etc.

Would it just be Bitcoin + Colored Coins? Or is there something clever that can be done?

The question you brought up about whether governments are considering buying up bitcoins is an interesting one.

It looks like the classic Prisoner's Dilemma problem. All governments would be better off if bitcoin died out, but the first government to initiate a bitcoin-reserve buying program would be in a much better position than other governments if bitcoin does become ubiquitous.

I think in the world of American hegemony we lived in between 1990-2000 there would be no bitcoin buying, but in an increasingly bipolar world of East vs. West that is developing today along with a few fragmented rogue states such as North Korea and Iran, someone will defect and start buying bitcoin which will trigger a cascade of strategic buying.

Disagree about the creation of i-coin though. No nation has enough power to unseat a truly global currency like bitcoin once it becomes ubiquitous, unless they conquer a super-majority of the world.

https://eprint.iacr.org/2014/161.pdf

How practical is this in the wild?

My reputation thread.

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Now OP can buy as much KFC as he wants to show his friends on Skype on the other side of the world