Colored coins to paint revolutionary future for Bitcoin

Meni Rosenfeld, a contributor of the whitepaper on the subject, which is still in progress, explains a range of apps. Colored coins can be used to show physical assets, like a house, car etc. These coins can also stand for financial instruments like bonds and stocks, including interest-bearing assets.

Colored coins allow developers to build smart property on top of blockchain. There is no requirement to buy extra coins, we just need regular bitcoins to represent and transfer assets. They work by coloring a bitcoin transaction output with an ID of an asset.

Bitcoin is indeed a very useful thing, but it also has the potential to reform the whole world if bitcoin users could use it to issue bonds, shares or even design alt currencies on top of bitcoin; they would add incredible value to this revolutionary currency. This whole colored coin concept will completely democratize finance.

Colored coin is basically a concept designed to be layered on top of bitcoin, creating a fresh set of information about the coin which is being exchanged. The attributed added to the coin changes them into tokens, which can later be used to represent almost anything.

This system will bring revolution in the cryptocurrency world. One of the criticisms to altcoins is that they fail in any real value outside of what people are willing to pay for them. And colored coins destroy this criticism by giving bitcoin users the freedom to represent their assets using colored coins.

Coinprism ( colored coins wallet for Bitcoin ) uses the Open Assets protocol; this is a protocol built on top of bitcoin to enable the exchange of colored coins, or bitcoins that have already been colored or modified to represent decentralized assets.

According to the experts, users don’t have to trust their bitcoins to a centralized exchange. Your ownership records ( to cheat, for instance) can’t be manipulated by companies. So basically, if anybody gives you an IOU, it is not at all a good idea to leave it with the person who has issued it or to any affiliated party.

This innovative concept would give bitcoins a huge advantage over traditional ways of sending assets.But like any other concept of bitcoin and blockchain, there are some challenges for colored coins too.