Q: What are Colored Coins? | [Free #19]
Bitcoin Maximalists tend to shy away from NFTs and other well known features of Turing-Complete blockchains, but most of these ideas were first implemented on the Bitcoin stack.
Well hello, there!
This week, I’m digging deep into the archives for a topic - this particular technology isn’t very buzzword compliant these days, but it is relevant for a few reasons.
As I’ve discussed several times here in this newsletter, there are various tribal rifts within the blockchain sector, but very few are as prominent now as between the Bitcoin Maximalists and the rest of the cryptocurrency and blockchain world. If you’ve ventured into discussions regarding things like NFT or other cypherpunk-like applications of blockchain technology, you’ve likely run into knee-jerk reactions against anything like that, usually on the grounds that it’s just not bitcoin.
Part of why I don’t ascribe to that mode of thinking (and why I like to push this idea of “cypherpunk maximalism,” is I remember when early blockchain thinkers were pushing for exactly these types of technologies and business models built on top of the bitcoin stack.
Today we’re going to dive deep into one of those historical examples of that: Colored Coins, as well as what became of the idea and
Thanks for your support!
As always for those who are, thank you for being a subscriber to my newsletter! Your support makes all this possible.
If you think you know someone who’d benefit from this issue, feel free to forward them this email!
If you’re someone who got this email via forward, use the following link to try us out for another two weeks, free!
As is appropriate for a newsletter on the topic, you’re able to purchase your subscription using a variety of cryptocurrencies, including Bitcoin!
And, of course, there’s this new thing we’re doing with art NFTs (read more, read more paid) where you can buy some cover art and own a lifetime subscription to the pub!
In this issue:
Blockchain Bulletin
Square is building a decentralized finance business platform. Mobile payments company Square is building a new decentralized finance business named TBD that will focus on Bitcoin, the company’s CEO Jack Dorsey announced on Twitter.
TikTok bans paid crypto shills from its platform. TikTok banned advertisements by influencers and content creators who promote “branded content” related to cryptocurrencies, according to CoinJournal.
PayPal increases the weekly purchase crypto limit to $100,000. PayPal is increasing its weekly crypto purchase limit to $100,000, up from $20,000, a fivefold increase, according to CNBC. The company also removed its previous annual limit of $50,000.
Blockchain Behind the Scenes
Blockchain-based fantasy soccer NFT company Sorare to raise $532M. The blockchain-based fantasy soccer nonfungible token card game company Sorare has plans to raise $532 million from Japanese investor SoftBank, sources close to the company said.
Blockchain audit firm CertiK raises $37M in Series B funding. Blockchain security firm which audits smart contract code to prevent exploits has landed $37 million in Series B funding to build its product.
Blockchain Deep Dive: What are Colored Coins?
The intellectual core of why Bitcoiners (maximalists, rally) are against these other technologies is a little difficult to pin down. Bitcoiners construct many reasons why Turing-Complete blockchain features are bad, but most of these ideas were first implemented on the Bitcoin stack.
The original paper on Colored Coins was written in 2012 by Meni Rosenfeld.
From a high level, the concept of colored coins are exactly what they sound like.
By “coloring” a Bitcoin, you turn it into a token that represents anything you want to trade.
In 2014, the USPS was considering this technology to issue what we’d now call NFT collectible stamps on the blockchain.
The marking (or coloring) of the coin usually happens in a centralized database of some kind, but can also be marked on chain in a way that can be recognized by a pre-defined standard.
The underlying currency still has the same value, but that value is ideally really small or really small relative to the thing stamped on it.
There were, for a time, several wallets designed on varying protocols for the concept of colored coins, but over time they lost out to other competing forms of technology.
On a technical level, there are a few colored coins that exist on Bitcoin natively, like the Bisq Network’s utility token.
Colored Coins largely have lost steam once the idea of Turing-Complete blockchains rose to dominance.
There are still several projects that build on the Bitcoin stack rather than migrate, notably RGB and Omnilayer.
Like what you read here? Consider paying for a subscription to help support our original reporting and deep dive topics - and you’ll get access to the full stories, not just the bulletpoints!