ColoredCoins: Launch New Digital Asset Blockchain Protocol?

ColoredCoins, found online at ColoredCoins.org, is an open source infrastructure that provides a framework for blockchain-based digital currencies. Find out how it works today in our review.

What is ColoredCoins?

ColoredCoins is an open source banking infrastructure “for a future of digital money,” according to the official website.

The project was launched in 2013 as a way to push metadata to the bitcoin blockchain. Today, the project has morphed into a complete ecosystem of various digital currency services. It’s an open source project supported by a worldwide community.

Here’s how the project explains its goals:

“The ColoredCoins project taps into the biggest and the most successful crypto-currency ecosystem in the world, Bitcoin, and creates a blockchain agnostic framework for digital-currencies that will apply those best practices to traditional finance.”

In other words, ColoredCoins wants to create infrastructure that can connect today’s largest cryptocurrencies – including bitcoin and others – to traditional banking financial services.

ColoredCoins has partnered with platforms like Colu, eToro, Bitt, and Lykke.

How Does ColoredCoins Work?

Today, there are three main components of ColoredCoins, including the core, the SDK, and the dashboard.

ColoredCoins Core:

This if a “full node” software that implements the ColoredCoins protocol. It’s used on top of Bitcoin Core. The ColoredCoins Core parses the data embedded in bitcoin transactions by other ColoredCoins node in order to securely recreate the current state of all ColoredCoins assets.

ColoredCoins SDK:

The ColoredCoins SDK can be embedded into apps built by any developer. It features a simple interface for creating ColoredCoins transactions. In order to fetch the current state of the chain, it must be configured to communicate with a ColoredCoins Core node.

ColoredCoins Dashboard:

The Dashboard is a web app (built using the ColoredCoins SDK) that allows anyone to issue, transfer, and manage digital assets using an easy UI. There’s a community-hosted dashboard you can try out, but ColoredCoins recommends migrating to a dashboard that you personally control as soon as possible.

The ColoredCoins Ecosystem

The ColoredCoins ecosystem consists of a stack of blockchain tools. These tools are interoperable. Tools include:

Issuance Dashboard:

ColoredCoins has an easy-to-use, open source issuance dashboard that allows issuers to manage currency distribution in the system.

Wallet:

ColoredCoins has a mobile wallet consisting of a ColoredCoins-aware Copay wallet.

Block Explorer:

ColoredCoins has an open source block explorer that allows public access to the blockchain, providing information about cryptocurrency distribution, transactions, and holders.

APIs:

The ColoredCoins APIs are part of the digital currency layer of the ecosystem. The APIs and SDKs are available to download from the Github repository (https://github.com/Colored-Coins/colored-coins-sdk) along with the ColoredCoins node.

Identity:

ColoredCoins has a user-friendly identity layer that makes it easy for customers to identity themselves and manage their private keys. The ColoredCoins stack is agnostic to digital identity protocols.

Payment Channels:

ColoredCoins has released a demo implementation of a Lightning Network payment hub. This will help ColoredCoins empower digital currencies to scale upward.

The ColoredCoins stack is blockchain agnostic. Overall, the goal is to create a fully functioning digital currency based on blockchain technology. This layer will connect business needs with end-users to provide the business logic, identity solution connectivity, privacy, and architecture for a scalable payments infrastructure.

Which Blockchains Does ColoredCoins Work With?

ColoredCoins is officially blockchain agnostic. However, the ColoredCoins.org website specifically lists three different blockchains and blockchain types, including:

Bitcoin:

By paying miner fees, ColoredCoins allows users to “rent” security services for their assets from the bitcoin blockchain. All ColoredCoins tools and protocols are based on the bitcoin blockchain. The project was first launched in 2013, and bitcoin was the only real option for development.

Multichain:

Most ColoredCoins infrastructure is based on the bitcoin blockchain. However, most of the ColoredCoins code can run on a “private” blockchain by deploying it on private bitcoin-based ledgers like Multichain.

Hyperledger:

HyperLedger is an open source community consisting of 100+ global corporations and managed under the Linux foundation. The goal is to build the standard for business transactions over the internet. ColoredCoins joined the Hyperledger project as an associate open source community to promote interop ability between blockchain ecosystems.

Ultimately, ColoredCoins continues to focus development on the bitcoin blockchain, but its concepts are blockchain agnostic. The ColoredCoins stack is already interoperable with UTXO-based blockchains.

ColoredCoins Conclusion

Launched in 2013, ColoredCoins is an open source project dedicated to creating a universal framework for digital currencies on top of a blockchain. The development is focused mostly on the bitcoin blockchain. However, the protocols are officially blockchain agnostic, and ColoredCoins is interoperable with UTXO-based blockchains.

The long-term goal of the ColoredCoins project is to provide blockchain agnostic tools for issuers, then provide the same functionality on other blockchains while facilitating cross-blockchain functionality as part of a “layer-2” solution for digital currency issuers.

In layman’s terms, ColoredCoins is a platform that allows anyone to issue their own blockchain-based digital currency, then manage the ongoing distribution of that currency.

To learn more about ColoredCoins and its ongoing goals, visit online today at ColoredCoins.org.