Colored coins VS Mastercoins - Which one is better?

[Financisto]

[...] 600,000 is a good number, but the main threat I see to Mastercoin value will be from Bitshares. People will probably sell Mastercoins for Bitshares if that idea actually worked as well as they say it will, but it's very possible that Mastercoin could have first mover advantage and work better too. [...]

I also agree with that opinion.

I guess the original thread's title should be "Bitshares VS Mastercoins". 

IMHO all alternatives lack proper statistical validation.

Only time will tell each one will survive.

BTW, I ask Mr. Luckybit permission in order to quote his post from Mastercoin thread.

I guess it answers at least most of OP's doubts:

The important thing to note about Mastercoin is momentum. It has the momentum. It has around half a million dollars from crowd funding to provide incentives for developers to actually build it. Owning the coins is like owning stock in Mastercoin and that provides incentive for developers and anyone else to prefer it over Colored Coin.

That is the mistake of Colored Coin. Colored Coin is like GNU Hurd which was the basis for Linux but most people don't know about it because it never had the same kind of developer support, marketing, or incentives to draw people to it.

When all is said and done speculators require incentives to do things. Mastercoin is being designed to attract speculation. Colored Coin is being designed by technical programmer types but since there wont be anything to trade initially and no crowd funding, and no momentum, in my opinion it's going to be left in the dust.

What would you choose as a developer or investor? Would you choose Colored Coin which by design will never be as powerful as Mastercoin? Which does not have momentum? But which I suppose could produce a simple solution to solve a simple technical problem? Or would you go with the momentum? If Colored Coin can capture the momentum and actually do a good job explaining what Colored Coin is then people will use it but it still isn't going to catch on fire like Mastercoin will.

Mastercoin will allow people to make bets and that feature alone will attract a very dedicated following. For example if Mastercoin works as intended we could bet on anything from which team will win the superbowl, to whether or not difficulty will double, to whether or not AsicMiner will be able to achieve 10% of the hash rate and we'd be able to do it in a completely decentralized manner. On top of that anyone who owns Mastercoins now is going to prefer using Mastercoin over Colored Coin because their Mastercoins gain value over time while Colored Coin is at best a platform which no one really has a stake in so who would care about it if everyone were a rational actor?

I know people are not rational and there will be plenty of people who like Colored Coin for ideological reasons. I can even think of some reasons why I might prefer Colored Coin and I own Mastercoins. One reason is that Colored Coin works on altcoin blockchains and Mastercoin works only with Bitcoin. There would be no real benefit to building an alternative fork of Mastercoin on top of Bitcoin if the original Mastercoin works as it should. There will definitely be demand for Colored Coin and perhaps Bitshares and Hops, and the market is going to be big enough where all of them will succeed on different blockchains but on the Bitcoin blockchain we will see Mastercoin dominate because it's basically build into it the blockchain and you cannot really beat that. Colored Coin is not built into the blockchain and that is both it's strength and weakness.

It's a strength because for Litecoin we'd have to use Colored Coin so perhaps they can create a niche around Litecoin and other altcoins. For Bitcoin it's going to either be Mastercoin ,  Bitshares,  or both but I don't think Colored Coin will be able to compete when both Mastercoin and Bitshares have lots of cash to build with and attract speculators with interest, dividends, and other kinds of incentive mechanisms which Colored Coin lacks.

I don't even see how you could build something like Mastercoin without some kind of coin which people would have to buy with Bitcoins. How would you get people to buy something with Bitcoins? People buy Mastercoins because they can be used to create new currencies. Those new currencies require backing in the form of escrow so that the supply can be controlled.

It's not just that Mastercoins are scarce, it's that they are incredibly valuable because they can allow so many possibilities but I suppose you could do some of it with Colored Coin or with some alternative to Mastercoin but it's all about speculation and liquidity,  once Mastercoin gets established its not going to be so simple to just clone it. If it were that simple then Bitcoin would have a difficult time competing with Litecoin because Litecoins are cheaper.

[1715042480]

1715042480

[1715042480]

1715042480

[1715042480]

1715042480

[alp]

mastercoin at least it got a price

So does CC. It's the smallest 0-fee bitcoin transaction that can be sent through the bitcoin network.

He clearly meant that the format is conducive to speculation, direct value, etc. Whether that's a +, the future will decide. This does in a sense give it momentum, and at the least grabs attention.

Which is why I'm wondering if MC is all speculation for the price. CC biggest advantage is that it will be cheap for everyone to use forever. For MC to be valuable it has to do something CC can't.

I had typed out a good two paragraphs of my thoughts on this and accidentally hit the back button, so decided to just summarize. From my understanding CC (potentially) accomplishes a small list of important features but is ultimately limited in what it can achieve. Mastercoin can (potentially) solve these problems also, and beyond, having broad implications in ways that we don't even know yet because of the way it is implemented. And consider Bitcoin. Although it's purpose was not to function as a speculative device, that's what nurtured it into legitimization (if you consider BTC legitimate at this point). There's no lack of talent looking to be involved in the bitcoin world. Provided the technical hurdles can be overcome, I think the fact that it can be directly monetized and the approx 3/4 of a million dollars of funding puts Mastercoin in the lead. The amount the project has accomplished in one month is quite impressive.

Mastercoin being more ambitious is actually a good reason to be very careful of it.  It has to get nearly everything right it tries to do, or falls apart.  It's much easier to build small components are correct than a complete functioning system that tries to do everything.  Colored coins tries to solve one problem, and solve it very well.  MC tries to solve a ton of different problems all using the same solution.  While Mastercoin has the edge of getting a lot of people to try to get rich quick dumping tons of Bitcoins into it, that doesn't make it better.  It just means that they will get to the point of failure faster.

You make so many assumptions in this response that I'm not even going to bother.

No mastercoin proponent can bother, because they have no answers.

[HammerFist]

The only thing Coloredcoin or Mastercoin have in common is that they both will die as failed experiments.

Very same thing was said about bitcoin - many, many times.  Good to be in good company.

If colored coins don't pan out they won't take ~5,000BTC of investor money down with them; on a technical level both are decent ideas where a good implementation could be useful.

Investors at this level love high-risk, high-reward.  Nobody is crying if this goes bust.  I'd do it again 20 times - failing the first 19 just to hit on the final deal.  MSC has some very cool conceptual roots.  Let's see if they can get it into a practical form.  I sure can't find any reason which excludes that possibility today.   

If someone announces MSC2 now, I am in.  No regrets.

[HammerFist]

1exodus address private key gets lost, now what?

JR gave me a copy.  No problem.

[bitcool]

The only thing Coloredcoin or Mastercoin have in common is that they both will die as failed experiments.

If colored coins don't pan out they won't take ~5,000BTC of investor money down with them; on a technical level both are decent ideas where a good implementation could be useful.

Having a single Exodus address without Returning addresses is the main reason kept me from investing meanintruly amount of money in this, it doesn't need to be that way.

[TraderTimm]

Wow. I sure hope it won't be jail!

For it to be jail, you'll have to do something illegal.  I guess that leaves richest man in the world.  I've got to say, I do believe that Mastercoin does bring more function to society than Microsoft - and today that is where the richest man in the world is from.  So perhaps JR will be donating billions to kids in Africa soon.  Hmmm - cool. 

I think we'll see precisely why Satoshi was anonymous.

Its a shame that he's dragging his family into it as well, it would be different if it was just his own life at risk.

[dunchy]

I'm trying to find my way somehow through this noise storm and compare the two...


In JR's paper "MasterCoin Complete Specification" (aka "2nd bitcoin paper"), section "Escrow-Backed User Currencies", there is a picture about stability concept. It utilizes escrow fund to keep the value of a particular backed currency on desirable level, by manipulating the supply of it using MC if I'm right.

Is this feature possible with colored coins? If yes, please would you elaborate on mechanism because I wasn't able to find anything about it. Thanks.

[culexevilman]

Sorry for my ignorance, but whats colored coins?

[Meni Rosenfeld]

Sorry for my ignorance, but whats colored coins?

The thing that is described at https://bitcoil.co.il/BitcoinX.pdf and http://coloredcoins.org/.

Is this feature possible with colored coins? If yes, please would you elaborate on mechanism because I wasn't able to find anything about it. Thanks.

Technically, there is no feature in colored coins to enable this directly, but it could be done in an ad-hoc way. Economically, I don't think this would work in Mastercoin either.

[bitcool]

Economically, I don't think this would work in Mastercoin either.

It won't. It's a overly simplified model, like trying to drive  a Google car only by controlling its speed.

[TKeenan]

Sorry for my ignorance, but whats colored coins?

The thing that is described at https://bitcoil.co.il/BitcoinX.pdf and http://coloredcoins.org/.

Don't waste any time reading that - colored coins is a dead concept now.  Master is much bigger already, has much higher ceiling, has money in hand, does everything CC does, but better.  

Economically, I don't think this would work in Mastercoin either.

Even if it did work, why would anyone ever want to disturb free markets?  That is always a bad idea to restrain free trade in ANY fashion.  'stability' seems good - it's not.  Besides, no matter how clever the algorithm - the efficiency of traders will take into account the movements and they will profit from all imbalances.  It is a perfect way to take randomness out of market movements and leave open the possibility of trading on a program which counters the movement.  

I have started working on a way to get this thing into oscillations.  Once I can get it to oscillate, I'll magnify my profits.  Bet me.

They are going to drop the stability mechanism like a box of hot rocks.  I am sure of this.

[TraderTimm]

Mastercoin is a fail sandwich that will burn a lot of people, including the starry-eyed developers. I've tried to warn them about it, but they just push it aside, because remember - no plan can fail, what kind of crazytalk is that!

Also, they're too busy getting caught up in the "how much it will be worth $$$$" game to even consider any rational objections. So please, implement your exchanges on your 'fail-o-col", and see how fast the Feds get on your case. You won't even be operating in any kind of anonymous and decentralized sense (their parasitic use of the Bitcoin network hashpower excluded of course), so what do you think you will achieve?

Oh right, lots and lots of money - keep on going you blinded idiots.

[dunchy]

They are going to drop the stability mechanism like a box of hot rocks.  I am sure of this.

I doubt it. Who would want to accept MC and its ruthlessly spiked initial wealth distribution if it wasn't for some revolutionary new feature? And CC is working just fine for decentralize exchange without introducing some new cryptocoin barons. I think stability mechanism is either a point of MC's wide acceptance or its miserable failure. Why? Because, decentralized lending is the next big thing. Historically big. I think many people are sensing that, but still nobody has a clue how to do it. Especially how to make it work if a loan is indexed in deflationary currency. This mechanism is one way to do it. If it works.

I admit I haven't understood the explanation given in the article, so if somebody is kind enough to try to explain that once more, I'll be grateful.

[TKeenan]

Oh right, lots and lots of money - keep on going you blinded idiots.

The real power behind Mastercoin is the Naysayers who can't figure it out.  This is what drives the price so high.  Nobody in Mastercoin is looking for 'get rich quick' - none of the top holders are selling despite 10X returns.  Clear sign that their true interests are in the long term. 

Did you miss the bus?

[gabridome]

Does these updates change the perspective of both Coloured and Master coins?
http://www.coindesk.com/bitcoin-core-dev-update-5-transaction-fees-embedded-data/

It seems that the developers will leave a space of 80 bytes to store for example the hash of a title of property and some extra info in a future proof space on the blockchain for what I understand.

Both coloured coins and master coin could take advantage of this and politely store their information where they have put a space for them.

Are they going to do it in your opinion?

Did I miss something?

Could someone ELI5 on the meanings of these changes?

[Meni Rosenfeld]

Does these updates change the perspective of both Coloured and Master coins?
http://www.coindesk.com/bitcoin-core-dev-update-5-transaction-fees-embedded-data/

It seems that the developers will leave a space of 80 bytes to store for example the hash of a title of property and some extra info in a future proof space on the blockchain for what I understand.

Both coloured coins and master coin could take advantage of this and politely store their information where they have put a space for them.

Are they going to do it in your opinion?

Did I miss something?

Could someone ELI5 on the meanings of these changes?

This is useful for tag-based coloring (as opposed to order-based coloring), however without a network rule enforcing the color tags the usefulness is limited.

Note that colored coins' use of the blockchain is already much less hostile than Mastercoin's current implementation.

[spartacusrex]

I'm going to throw my hat in the 'Coloured Coins' Ring..

It's neater/smaller/tighter.. and I'm a big believer in KISS. [Keep It Simple Stupid]

I like MaterCoin, but if I have understood them both correctly, MasterCoin could be run on top of the CC concept ?

Once you have a coloured coin, you can add all the extra hoopla Master Coin does on top of that. You don't need a separate protocol.

I think MasterC adds things that aren't strictly necessary.. That could all/(almost all) be achieved by a 'clever' bitcoin client, that played with Coloured Coins correctly.

[johnyj]

I just read a little bit of both schemes. I'm confused by these design

They want to use a token to present any asset. But assets are not like money, usually they don't have fungibility, that requires a whole lot of validation of each assets: What if the underlying asset is destroied or lost? Who is going to audit the quality of each asset? etc ...

Besides, when it comes to purchase of assets, people seldom need an online system, they will meet personally and do the deal in person

Anyway, the abstraction level of both design is low, they are only suitable for a very limited sample of real world situation where the presented asset is standardized, like 99.99% pure gold bar. But, who is going to make sure you didn't get a tungsten stick? That gold bar is not locked together with a token in blockchain

Actually the validation problem is the core reason that an exchange can not be really carried out on a P2P network: Bitcoin's genuinity is validated by the blockchain, there is no problem at this end, but at the other end, you always need to rely on some authority to ensure its validity. On a P2P exchange if you receive lots of counterfeited USD, what you can do with them?  

[ANiceJewishBoy]

This thread's title is borderline racist.

[Meni Rosenfeld]

I just read a little bit of both schemes. I'm confused by these design

They want to use a token to present any asset. But assets are not like money, usually they don't have fungibility, that requires a whole lot of validation of each assets: What if the underlying asset is destroied or lost? Who is going to audit the quality of each asset? etc ...

Besides, when it comes to purchase of assets, people seldom need an online system, they will meet personally and do the deal in person

Anyway, the abstraction level of both design is low, they are only suitable for a very limited sample of real world situation where the presented asset is standardized, like 99.99% pure gold bar. But, who is going to make sure you didn't get a tungsten stick? That gold bar is not locked together with a token in blockchain

Actually the validation problem is the core reason that an exchange can not be really carried out on a P2P network: Bitcoin's genuinity is validated by the blockchain, there is no problem at this end, but at the other end, you always need to rely on some authority to ensure its validity. On a P2P exchange if you receive lots of counterfeited USD, what you can do with them?  

The main use case is company stock. You have to believe in the company of course, but you don't need to rely on any centralized, cumbersome stock exchange.