ChromaWallet (colored coins): issue and trade private currencies/stocks/bonds/..

[FrictionlessCoin]

Alternative,  would you be able to act on an advisory role on the implementation?  Just review and validate the implementation?

Yes, if you can find people who can implement it (first and foremost brave C++ programmer(s)), I'll be able to discuss it.

Excellent!  Thanks in advance.

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[1715082931]

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[chengzi0418]

how can I buy it?

[jtimon]

By the way, killerstorm, you can list your complementary-currency-related (also free knowledge-related) chromawallet project on the freicoin foundation web to receive matched donations.
The colored coins nonprofit could be listed too:

http://foundation.freicoin.org/#/donations

how can I buy it?

You don't buy "colored coins", you issue your own "color" and buy other people's colors.
Why are you so eager to put your money into something you don't know anything about?

[delulo]

For example, let's say you own some gold at your house. You could hypothetically take 5 satoshis (0.00000005 BTC) and say that each one of those satoshis is equal to one gram of the gold that you hold in your home. You could then exchange those 5 satoshis backed by one gram of gold each on the decentralized exchange in the Chromawallet.

see http://voices.yahoo.com/bitcoin-20-explained-colored-coins-vs-mastercoin-vs-12475857.html?cat=15&utm_content=buffer522e4&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

How are the colored coins "backed" by the gold. The guy that issued the colored "gold coins" wont send the gold to me?! And what keeps me from saying I have 1 kilo of gold here and will color this kilo, so you can then buy it from me for 45 (colored) BTC (about what a kilo is worth in btc, roughly). Are the btc held in escrow or burned or something?

You see I didnt get it yet But everywhere I read about colored coins people don't really get specific about how it works. 

[FrictionlessCoin]

For example, let's say you own some gold at your house. You could hypothetically take 5 satoshis (0.00000005 BTC) and say that each one of those satoshis is equal to one gram of the gold that you hold in your home. You could then exchange those 5 satoshis backed by one gram of gold each on the decentralized exchange in the Chromawallet.

see http://voices.yahoo.com/bitcoin-20-explained-colored-coins-vs-mastercoin-vs-12475857.html?cat=15&utm_content=buffer522e4&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

How are the colored coins "backed" by the gold. The guy that issued the colored "gold coins" wont send the gold to me?! And what keeps me from saying I have 1 kilo of gold here and will color this kilo, so you can then buy it from me for 45 (colored) BTC (about what a kilo is worth in btc, roughly). Are the btc held in escrow or burned or something?

You see I didnt get it yet But everywhere I read about colored coins people don't really get specific about how it works.  

When you buy a stock from the stock exchange,  what do you get?

When you buy an ETF like GLD from a stock exchange, what do you get?

In both cases,  you get an IOU from the issuer or the stock or ETF.

[delulo]

For example, let's say you own some gold at your house. You could hypothetically take 5 satoshis (0.00000005 BTC) and say that each one of those satoshis is equal to one gram of the gold that you hold in your home. You could then exchange those 5 satoshis backed by one gram of gold each on the decentralized exchange in the Chromawallet.

see http://voices.yahoo.com/bitcoin-20-explained-colored-coins-vs-mastercoin-vs-12475857.html?cat=15&utm_content=buffer522e4&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

How are the colored coins "backed" by the gold. The guy that issued the colored "gold coins" wont send the gold to me?! And what keeps me from saying I have 1 kilo of gold here and will color this kilo, so you can then buy it from me for 45 (colored) BTC (about what a kilo is worth in btc, roughly). Are the btc held in escrow or burned or something?

You see I didnt get it yet But everywhere I read about colored coins people don't really get specific about how it works.  

When you buy a stock from the stock exchange,  what do you get?

When you buy an ETF like GLD from a stock exchange, what do you get?

In both cases,  you get an IOU from the issuer or the stock or ETF.

Can you be a bit more explicit?
Do you mean anyone can say I color this coin to be worth 1 kilo of gold and whoever wants to can buy this from me for 60 btc or send me 45k usd in cash via wire transfer? So this concepts makes it necessary that people trust me as the issuer?

[killerstorm]

How are the colored coins "backed" by the gold.

Colored coins can be used to track ownership of securities, such as shares, bonds, IOUs and so on.

The guy that issued the colored "gold coins" wont send the gold to me?!

The guy who issued "gold coins" is supposed to demonstrate a signed contract and evidence that he is trustworthy and owns the asset.

It's up to you to decide if he is trustworthy enough.

In simple terms, colored coins allow you to do same things you could do on centralized Bitcoin 'stock exchanges', like BTCT.co, BitFunder.com, HavelockInvestments etc., but in a decentralized way: you don't have to trust your bitcoins to exchange.

However, trustworthiness of assets (securities) is the same, and I'm sure we'll see a lot of scams and bankruptcies.

As for gold, there were funds traded on BTCT.co, e.g.: https://bitcointalk.org/index.php?topic=133556.0

Some guys actually posted photos of physical gold coins they own.

But I think at some point bigger and more trustworthy companies will get involved.

So this concepts makes it necessary that people trust me as the issuer?

If somebody tells you that it is possible to create gold-backed coins which require no trust, he is lying.

I know that some projects (not related to colored coins) put cryptocurrency into escrow to "guarantee" value of "gold" coins... I hope I don't need to explain why it won't work so well...

[delulo]

Thanks for explaining!  

I know that some projects (not related to colored coins) put cryptocurrency into escrow to "guarantee" value of "gold" coins... I hope I don't need to explain why it won't work so well...

What are the arguments that such a system would not work?

[killerstorm]

I know that some projects (not related to colored coins) put cryptocurrency into escrow to "guarantee" value of "gold" coins... I hope I don't need to explain why it won't work so well...

What are the arguments that such a system would not work?

What happens if value of cryptocurrency held in escrow drops?

[FrictionlessCoin]

I know that some projects (not related to colored coins) put cryptocurrency into escrow to "guarantee" value of "gold" coins... I hope I don't need to explain why it won't work so well...

What are the arguments that such a system would not work?

What happens if value of cryptocurrency held in escrow drops?

What colored coins do is guarantee the quantity of coins.   

Which is actually

So in the case of say Open Transaction based issuer,  the cryptocurrency is placed in escrow.

[killerstorm]

Which is actually

So in the case of say Open Transaction based issuer,  the cryptocurrency is placed in escrow.

BitShares uses both collateral and derivative market incentives to peg value of digital coin to value of a commodity.

(Open Transactions is more-or-less honest cryptocurrency accounting system.)

[flayway]

Can someone explain me short how i can invest to colored coins? I download software, transfer some BTC there and mark that to some color and then to waiting? :O

[killerstorm]

Can someone explain me short how i can invest to colored coins?

There is no way to invest into 'colored coins' in general. It is just a concept, not something you can buy.

You can invest into concrete securities, however.

For example, if ActiveMining will issue its shares in form of colored coins, you'll be able to buy those shares via ChromaWallet p2ptrade... But in that case you're investing in ActiveMining shares, if company goes bust their value will be negligible.

Currently there are no real assets issued in form of colored coins, our software is alpha and should be used only on testnet. We plan to release beta software in end of January.

Perhaps, one day you'll be able to invest in colored coin startups...

I download software, transfer some BTC there and mark that to some color and then to waiting? :O

LOL

[FrictionlessCoin]

For example, if ActiveMining will issue its shares in form of colored coins, you'll be able to buy those shares via ChromaWallet p2ptrade... But in that case you're investing in ActiveMining shares, if company goes bust their value will be negligible.

Just made me realize that just enabling the capability in the iXcoin daemon is just one tiny step forward.

To actually get higher adoption, we need to engage exchanges.

I know for one that eToro is extremely interested in this technology.

At this time, i look at iXcoin as a extremely viable platform for building this.

Oh... BTW...  read somewhere about OT and colored coin integration... something about placing the colored coins in escrow.... do you know about this and do you have a more detail explanation?

ooops.... my apologies... I though this was the iXcoin thread.

[delulo]

If somebody tells you that it is possible to create gold-backed coins which require no trust, he is lying.

So colored coins (as with ChromaWallet) would need law enforcement and a legal backing if you do not only want to use it transfering gold from your dad to you? The bitcoin that is colored as e.g. 1 ounce of gold is essentially a digital IOU right?

[FrictionlessCoin]

If somebody tells you that it is possible to create gold-backed coins which require no trust, he is lying.

So colored coins (as with ChromaWallet) would need law enforcement and a legal backing if you do not only want to use it transfering gold from your dad to you? The bitcoin that is colored as e.g. 1 ounce of gold is essentially a digital IOU right?

In the most general sense,  any colored coin that is issued by an issuer conveys certain rights.  These rights can be that if a coin is tendered to the issuer a certain amount of gold is delivered.   It could be virtual stuff as well, if a minecraft coin is tendered a certain amount of redstone is delivered. 

It is an a IOU where the quantity of these IOUs are made public in the block chain.

By contrast, with Ripple, the number of IOUs that are issued is not known publicly.

 

[Sukrim]

By contrast, with Ripple, the number of IOUs that are issued is not known publicly.

All IOUs issued by Bitstamp on Ripple right now:
https://ripple.com/tools/info/#rvYAfWj5gh67oV6fW32ZzP3Aw4Eubs59B (sum the account_lines responses)
https://ripple.com/graph/#rvYAfWj5gh67oV6fW32ZzP3Aw4Eubs59B <-- easier to see here, though it would maybe crash your browser with the graph display

Maybe you mean that the amounts that could be issued in the future are not known? This is true, while with ColoredCoins you create a fixed amount of IOUs you are flexible in that regard in Ripple.

[delulo]

If somebody tells you that it is possible to create gold-backed coins which require no trust, he is lying.

So colored coins (as with ChromaWallet) would need law enforcement and a legal backing if you do not only want to use it transfering gold from your dad to you? The bitcoin that is colored as e.g. 1 ounce of gold is essentially a digital IOU right?

In the most general sense,  any colored coin that is issued by an issuer conveys certain rights.  These rights can be that if a coin is tendered to the issuer a certain amount of gold is delivered.   It could be virtual stuff as well, if a minecraft coin is tendered a certain amount of redstone is delivered. 

It is an a IOU where the quantity of these IOUs are made public in the block chain.

By contrast, with Ripple, the number of IOUs that are issued is not known publicly.

 

A real world IOU for gold would be based on a contract (written paper, contract between two parties) and contracts (if they fulfill certain requirements stated by some law) are enforceable. Based on the law and on the contract you can sue someone that doesnt fulfill his promises. And the state enforces it in the end...
But with colored coins: There would have to be some law that defines issuing colored coins as a legal form of issuing property. It is the same with the question whether a contract with no signature is legally legitimate or contracts made on the phone verbally.
It is always the same: If there is no completely decentralized trust less process legal enforcement makes it valid.
Is my thinking wrong? 

[killerstorm]

But with colored coins: There would have to be some law that defines issuing colored coins as a legal form of issuing property. It is the same with the question whether a contract with no signature is legally legitimate or contracts made on the phone verbally.

Well, an issuer is supposed to provide a contract which is digitally signed by him. In most countries law recognized digital signatures, they are widely used by banks etc.

So the issuer can write a contract like this: "I owe $100 to person who can produce proof of ownership according to the following protocol: ...".

Essentially, colored coins can be seen as a decentralized database which contains records of ownership of digital tokens, with transfers being authorized using digital signatures and secure decentralized timestamping.

I don't think that it explicitly needs to be approved by the government. For example, let's consider PayPal: they record information about user balances in some kind of a database. Suppose one day PayPal goes under and users will want to claim their funds. It's unlikely that government said that a certain database is approved for storing balances, more like they'll just collect evidence from PayPal and use it to distributed liquidation proceedings.

Same thing about Amazon gift cards: it doesn't matter how Amazon stores information about them, it is important that they constitute Amazon's liabilities.

(Disclaimer: I'm not a lawyer, everything mentioned above are just ideas.)

[delulo]

But with colored coins: There would have to be some law that defines issuing colored coins as a legal form of issuing property. It is the same with the question whether a contract with no signature is legally legitimate or contracts made on the phone verbally.

Well, an issuer is supposed to provide a contract which is digitally signed by him. In most countries law recognized digital signatures, they are widely used by banks etc.

So the issuer can write a contract like this: "I owe $100 to person who can produce proof of ownership according to the following protocol: ...".

Essentially, colored coins can be seen as a decentralized database which contains records of ownership of digital tokens, with transfers being authorized using digital signatures and secure decentralized timestamping.

I don't think that it explicitly needs to be approved by the government. For example, let's consider PayPal: they record information about user balances in some kind of a database. Suppose one day PayPal goes under and users will want to claim their funds. It's unlikely that government said that a certain database is approved for storing balances, more like they'll just collect evidence from PayPal and use it to distributed liquidation proceedings.

Same thing about Amazon gift cards: it doesn't matter how Amazon stores information about them, it is important that they constitute Amazon's liabilities.

(Disclaimer: I'm not a lawyer, everything mentioned above are just ideas.)

That's not so far away from my perspective... What is needed though would be a real world identity of the issuer or a proof of trust record (keyhotee or something) or a trust voting system like in ebay...