Cross Chain Token Pinning with Colored Coins?

[jcrubino]

Do any implementations or ground work exist for cross chain pinning?

I have one possible solution:

1.  Burn coins on one chain with message (hash) referencing the pegged asset issuing address on the other chain    
2.  Issue Colored Coin asset pegged to the burned txn on the other chain using the reference address.

Will this solution hold?  What problems will I encounter?

Thanks


Edit:
   Changed "pegging" to "pinning" as this is not meant to stabilize any blockchain tokens, just make them available for hyper-distributed value exchange on external blockchains.

[1714600929]

1714600929

[andytoshi]

Are you aware of the sidechains whitepaper? The problems you will encounter are keeping the two chains in sync with each other, dealing with reorganizations on each chain, authenticating the transfers, etc.

It seems to me that coin coloring is totally orthogonal.

[jcrubino]

Thanks Andy for speaking up about this.
We have met on IRC a few times.

> two chains in sync
  Do burned coins need to sync?  

> reorganizations on each chain

  This is a good point and I will need to look at this more carefully.
  At this point I think it would only be a problem if the coins are burned at the time of the reorganization.  Colored coins cast during a resync would be treated like the chain token defaulted, so it could happen, especially with new altcoin chains.  The planned use case is for more established altcoin blockchains.  The operator of such a practice would be holding the private keys for the chains in questions, so while a chain might reorganize the base colored tokens could be reissued.

> authenticating the transfers
  I believe I just did not make my problem and solution clear enough from the start.  All transfers are now handled by the colorcoin tracking system and the Bitcoin blockchain rules.

I am aiming for a max-min solution for chains that choose not to pin on a side chain.

I use colored coins in the example as it is the most simple to implement with.  CounterParty might be a more powerful solution for more exotic smart contracts, but the original problem was the auditable issuance of composable assets from external chains on the Bitcoin blockchain.  

The identity of the external chain burned token is pinned (the unit of account is moved) and the color coin reflects the free market value of the external tokens.  I realize now I should have made the title cross chain token pinning.  If the chain goes bust the colored coin goes bust unless it has a thriving ecosystem on the chain of colored coin issue.  

What makes this attractive for all users is the security features of Bitcoin are inherited with the issuance of the colored coin and as mentioned the assets become composable into new hybrid assets and a new industry of bean counting can begin.

Feel free to expand on the issues here I am not covering or missed. I do not usually post here but thought I should as the feedback is usually more rigorous and it seems to be the best practice with any new application ideas.

Edit:
   Changed "pegging" to "pinning"

[namecoin]

Care to elaborate more?   

[jcrubino]

Care to elaborate more?   

Pick on something in my prior post and I will.

[jcrubino]

Care to elaborate more?   

Made some corrections and changed word usage from "pegging" to "pinning".


The concept is more like atomically teleporting units of value across blockchains and the intent is creating an environment for hyper distributed trade within the blockchains ecosystem.  It appears to be the least complex solution with the best security for all blockchains.  This will work for almost any blockchain except the crypto-note derivatives which may not be able to be colored though they can be time-locked allowing the value unit transferred to external chains. 

This would allow exchangers to choose one blockchain for which they can have a smaller set of protocol based security practices to work with.  At first glance it is a better way to hold tokens of value, eventually it might be a decent way to trade multiple blockchain tokens on the blockchain of the users choice.  It could also help Colored Coined adoption and development in the end.

Mods are welcome to move this post to an "Altcoins" appropriate board if this is unfit for this board.