Motivation

killerstorm edited this page Jan 20, 2014 · 1 revision

Colored coins allow one to represent ownership of various assets (such as securities, smart property, private currencies, etc) within the Bitcoin blockchain (or blockchain of any Bitcoin-like cryptocurrency). In-blockchain representation of ownership has following benefits;

  • sending and receiving these assets is as easy and secure as sending/receiving bitcoins
  • it is possible to atomically swap assets for bitcoins, which enables decentralized, trustless trading
  • records of ownership are fully tamper-proof (as long as Bitcoin works as advertised) and thus can serve as evidence of ownership

Particularly, using specifically Bitcoin blockchain (rather than some alt-coin) has following advantages:

  • Bitcoin security is backed by biggest hash power
  • Bitcoin is the cryptocurrency with the biggest market, and liquidity is important for decentralized exchange applications
  • there is an existing community of Bitcoin users anticipating these features
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