A comparison of colored coins

[Elwar]

I am working on a business that will need to issue stocks in the next few months. I would like to use the magic of the Bitcoin blockchain to record these stocks as it is the most secure ledger in the world.

As I delve into the world of colored coins it can get rather confusing. There is no single "colored coin" standard, just a few different approaches that are not compatible with one another. Some stray far away from Bitcoin almost to the point of creating their own alt coin. A few are completely Bitcoin blockchain based. Those are the ones I prefer as I am most confident in Bitcoin.

The main protocol I am leaning toward is Open Assets. It uses the OP_RETURN of a transaction to include 20 bytes of data which includes the amount of stocks transferred and a URL link to some meta data to help with visualizing the asset. Very simple and clean, not a lot of overhead for the blockchain and it already has several implementations including an offline and online wallet. Most importantly, Overstock and NASDAQ are using this protocol for their attempts at stocks on the blockchain.

The latest protocol released is from Colu at coloredcoins.org which promises more features such as bittorrent compatability (useful for not relying on a central web server to store meta data) and a few other things. But it is in its early phase and I do not know much about the actual protocol yet.

Others such as Factom, Counterparty and Ethereum seem very altcoinish. With some even ripping on Bitcoin in their white papers, so I have no confidence in them.

I read one article where Mike Hearn says he is not a big fan of colored coins using the Bitcoin blockchain as a way to store assets, calling it a lazy approach. I am curious about why it would be considered a lazy approach and what would be a more sophisticated approach. I would think that using the Bitcoin blockchain for assets gives it more intrinsic value such that even if the price drops, Bitcoin would still be necessary for many other things (like gold being useful as jewelry).

Has anyone else looked into this much? What are your opinions on the different approaches?

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[box0214]

i think you might want to look into NXT.... they have everything you need and its quite under the radar at the moment with active development. they just have a problem marketing themselves...

If your a bitcoin purist, then ignore my posts. Because if bitcoin was to do anything close to what nxt has right now give it at least 10+ years seeing all the rage over 20mb blocks.

Don't get me wrong, I'm all for Bitcoin too, but it just doesn't work in certain applications. I see NXT as a platform not a competing currency... its a shitcoin honestly, but the platform is something I've never seen that any coin has even come close yet, even ethereum.

Put the Bitcoin purist mentality aside for 10 minutes, and just check out what these guys have done. i was a bitcoin purist myself.. http://jnxt.org/nxt/

[Elwar]

i think you might want to look into NXT....

Nope.

Next!

[manselr]

There's tons of great projects out there.. besides NXT and Ethereum, Maidsafe is amazing as well and worth checking out. But in any case, it's kinda offtopic to suggest NXT in basically a Bitcoin thread. And remember, all it takes is good enough for it to be a success, it doesn't need to be perfect.

[dserrano5]

Maidsafe is amazing as well and worth checking out.

The main problem with Maidsafe is that they aren't there yet. "Later this year" says the website.

[funkenstein]

Take a look at Coinspark.

Also relevant:

http://trilema.com/2013/why-i-nixed-p2p-colored-coins-and-all-that-jazz/

[coretechs]

i think you might want to look into NXT.... they have everything you need and its quite under the radar at the moment with active development. they just have a problem marketing themselves...

You forgot to mention that the decentralized voting system allows for asset issuers to create polls where only asset holders can vote based on their balance.  i.e. http://nxtportal.org/polls/1407765120236853374

[funkenstein]

i think you might want to look into NXT.... they have everything you need and its quite under the radar at the moment with active development. they just have a problem marketing themselves...

You forgot to mention that the voting system allows for asset issuers to create decentralized polls where only asset holders can vote based on their balance.  i.e. http://nxtportal.org/polls/1407765120236853374

NIce, thanks for that link.  A related project I also have been announcing today:  http://coin-vote.com

[amincd]

Has anyone else looked into this much? What are your opinions on the different approaches?

I am also very much interested in the answer to this question. A detailed breakdown of the specifications and strengths and weaknesses of the different Colored Coin protocols would be welcome.

The main protocol I am leaning toward is Open Assets. It uses the OP_RETURN of a transaction to include 20 bytes of data which includes the amount of stocks transferred and a URL link to some meta data to help with visualizing the asset. Very simple and clean, not a lot of overhead for the blockchain and it already has several implementations including an offline and online wallet. Most importantly, Overstock and NASDAQ are using this protocol for their attempts at stocks on the blockchain.

This is what I would be leaning toward as well.

[Elwar]

i think you might want to look into NXT.... they have everything you need and its quite under the radar at the moment with active development. they just have a problem marketing themselves...

You forgot to mention that the decentralized voting system allows for asset issuers to create polls where only asset holders can vote based on their balance.  i.e. http://nxtportal.org/polls/1407765120236853374

Yep, could already do that with Bitcoin for over a year.

Just about anything these alt coins think they're bringing to the table can be done with Bitcoin. And it has the benefit of the network effect and it's the most secure ledger in the world.

I am looking at Bitcoin solutions. Not alt coins. Every NXT person I have talked to basically wants Bitcoin to fail.

[bitcoinmasterlord]

Why don't you want NXT a chance? Because they "want bitcoin to fail" or are there better reasons?

I think you might overthink using a solution that is not used by anyone yet. It might lower your chances of a successful IPO, because it might hinder financials flowing to you. Because of Adoption, technical difficulties because of young tech, and so on.

[coretechs]

Just about anything these alt coins think they're bringing to the table can be done with Bitcoin.

Just because it can be done with Bitcoin, doesn't mean it should be, especially if it doesn't fit particularly well.  Bitcoin colored-coins solutions require you to involve a 3rd-party software or sidechain, and different crypto-currencies ARE sidechains, they just use economic "free-market pegs" instead of cryptographic.  

And it has the benefit of the network effect and it's the most secure ledger in the world.

I am looking at Bitcoin solutions. Not alt coins. Every NXT person I have talked to basically wants Bitcoin to fail.

People can be hostile to each other when they have financial interests that they perceive to be threatened.  I certainly want Bitcoin to succeed because it is the value base for other crypto-currencies/DAOs/DACs.  Nxt is an account-based decentralized services platform and you use the tokens (NXT coins) to pay for a variety of transaction types with different fixed fees.  That is nothing like Bitcoin.  Nxt has a lot of digital asset features native in the protocol and you can already do multiple types of deferred & voting based transaction commitments on-blockchain.  If it provides the features you need, at least try it out for free on Nxt testnet.  Nobody is asking you to stop using Bitcoin, and you can always hash your own checkpoints into the Bitcoin blockchain for extra security if you feel guilty.  

[Elwar]

I guess I should have self moderated this thread. It wasn't meant to be a platform for bringing Alt coin discussions to the Bitcoin forum.