One of the most exciting technologies that build on top of Bitcoin is called Colored Coins and it launched Today with Coinprism, a web based wallet that brings Colored Coins and the Open Assets open source protocol to life
Bitcoin is clearly a great technology for a decentralized currency. The number of users is growing by hundreds of thousands every month. The number of startups and merchants accepting the virtual currency is staggering. Several smart people, including Eric Schmidt, Ray Kurzweil, Al Gore and Richard Branson all think it’s the future of money. And, Bitcoin is not finished turning the world upside down.
One of the most exciting technologies that build on top of Bitcoin is called Colored Coins and it launched Today with Coinprism, a web based wallet that brings Colored Coins and the Open Assets open source protocol to life.
Colored Coins allows users to take small fractions of Bitcoins and add a secondary value to them. In practice this lets people create new assets and use Bitcoin’s network to secure and trade these assets. This simple idea opens up a wide range of possibilities.
For example you can start a company and let Colored Coins represent the ownership of the business. Your investors can trade their Colored Coins representing your business easily as if they were sending Bitcoins.
Exchanges can create Colored Coin dollars that will represent real dollars and people will be able to send each other these dollars easily to avoid any possible volatility of Bitcoin. Today sending fiat currencies is expensive, restrictive and/or slow. Soon it will cost little and will be as fast as sending Bitcoins.
Colored Coins can also represent precious metals, property and can be used for marketing purposes by multinational companies that need a frictionless global currency that works online and in mobile apps.
Colored Coins will not only disrupt all the industries mentioned above, they will also pose a competition to smaller altcoins and further strengthen Bitcoin. Colored Coins will provide most of the functions altcoins provide and remove many of the problems they suffer from such as 51% or time warp attacks. For most purposes it will make sense to use Colored Coins instead of starting a new altcoin.
So how do you use Coinprism?
When you create an account Coinprism creates a unique Bitcoin address for you. This is the address where you can receive Colored Coins. The web app automatically recognizes the type and amount of Colored Coins you received and shows it as an asset in your wallet. Each transaction is carried on 600 Satoshis (approximately 0.2 dollar cents), so this is the minimum amount you use each time you send Colored Coins from your wallet. You can also optionally attach 0.1 mBTC (4.4 dollar cents) transaction fee to make sure the coins are delivered fast.
Besides receiving and sending you can also issue new Colored Coins with Coinprism. To create a new Colored Coin all you need to do is fill out a form, upload logos and spend 600 Satoshis. After this you can send out your brand new Colored Coins to the world.
If you change your mind you can recycle your Colored Coins and get your Bitcoins back. You don’t burn them.
There is a lot of work to be done before Colored Coins will truly be ready for mass adoption, but Coinprism lays down the foundations. Next step in development are Colored Coins blockchain explorer, exchange, cold storage apps and verified accounts.
Colored Coins are just one of several Crypto 2.0 ideas in development. Etherium and Mastercoin are two other exciting projects that solve similar problems with a slightly different approach.
You will have the opportunity to hear about these projects among many other Bitcoin related subjects directly from the creators at the Inside Bitcoins Conference and Trade Show on July 28-29 at the Hilton Tel-Aviv Hotel.