Bitcoin Cash’s Blockchain Token Assets: Colored Coins & Cryptonized Cash
Token Assets Will Surely Be Coming To BCH
The BCH community and developers have evidently been bolstering the idea of tokenization on the BCH chain. There’s been a bunch of ideas so far with Andrew Stone’s GROUP proposal and Joannes Vermorel’s Tokeda paper. Then this week Bitmain developers revealed the Wormhole project that utilizes a fork of the Omni Layer.
On 18th of this month, two more token ideas have been introduced for the BCH chain — One concept from the Cryptonize.it developers and another proposal was written by a group of six developers including Jonald Fyookball, James Cramer, Unwriter, Mark B. Lundeberg, Calin Culianu, and Ryan X. Charles.
There is a certain lack of confidence in permissionless tokens that are built around a central point of failure. To put this into perspective, consider a stock that is traded freely on a market but for which the dividend payout can only be given after the stock’s owner provides Know Your Customer (KYC) information. With cryptocurrencies, the tokens can be traded without issue; however, redeeming the tokens is virtually impossible without first receiving permission.
There are a variety of tokens that are more permissioned than others and then there are some, like BCH, that is permissionless. The cryptocurrency community has already shown, through its acceptance of BCH, BTC, and Ethereum, that it wants at least a portion of the token offerings to be completely permissionless.
It’s already possible, to some degree, to create new tokens on the BCH blockchain through the use of colored coin protocols, the same type used on the BTC network. The benefit to colored coins is that they don’t require changes to any protocols. Compared to the BTC network, BCH colored coins are easier to use since they have lower transaction fees and a larger data size thanks to the OP_RETURN code.
What is the Simple Ledger Protocol?
A paper titled “Simple Ledger Protocol: A token system for Bitcoin Cash” was proposed for the BCH network that handles tradeable redeemable tokens without a consensus upgrade. Enhancement proposals such as GROUP have not been able to obtain consensus needed to change the base protocol.
Simple Ledger Protocol (SLP) utilizes metadata in OP_Return transactions and the SLP creators believe consensus can be achieved by “token users and market participants adhering to a prescribed set of simple rules.”
The community may end up using a bunch of different color coin methods down the line or perhaps they may just use the superior tokenized system. Enthusiasts are appreciating the competition and the amount of development dedicated to bringing tokenized assets to the Bitcoin Cash network.