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The Open Source Protocol for Creating �Digital Assets On Bitcoin Blockchain

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Two Sides of the Coin

Common approaches towards Bitcoin

Blockchain Infrastructure

Using Blockchain qualities:

Public ledger, Traceable

Consensus agreement =

Trusted (P2P)

Currency

Medium of exchange:

World’s first decentralized currency (P2P) - open source system of digital tokens

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Blockchain Innovation

A shared and secured universal “Excel Sheet”

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Blockchain Innovation

A trusted way to transfer value between 2 parties (peer- to-peer) �without the need for a trusted 3^rd party to validate the transaction. �When a transaction is being made, both sides can be certain the �digital data have switched hands and can’t be replicated elsewhere.

The BIG innovation about Blockchain!�The main advantages of the Blockchain:

Decentralized consensus - the whole network agrees that all transactions (currency or digital assets) in the “excel sheet” are valid and approved. �One could be sure that if it’s in there, then this is what counts.

Security - no single point of attack (e.g. breaking into a Bank). �The more it is adopted by a mass of users, the more it is secured - the computing power increases accordingly - by the global net. �Use-case suggestion: issuing bonds on top of the Blockchain that could potentially be stolen from your personal safe.
Transparency - the Blockchain serves as an open ledger, transparent for all to see.�Use-case suggestion: copyrights - avoiding intellectual property violations.
Consensus - everyone agrees that the sealed record on top of the Blockchain is indeed valid, keeping the status quo. �Use-case suggestion: voting records - keeping the democratic process.
Traceability - one could track an asset history to be sure the asset he owns is Kosher.�Use-case suggestion: fine art certificates - validating this is the original piece and the hands it has switched between.

מוריד את הריכוזיות…

ככל שיותר כורים הרשת יותר מאובטחת

כוח המיחשוב של הרשת של ביטקוין חזק יותר

יתרונות של מערכת מבוזרת

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The Future of Blockchain

# Proof of Work - the only blockchain that has proven to be working and secured �# Mass Adoption - millions of people are already using it

# Massive Investments - more than $900M in VC to develop Bitcoin’s ecosystem�# Usage - it serves as the leading Blockchain for storing value

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The Future of Blockchain

2014 was the year of Bitcoin 1.0 �2015 is the year of Bitcoin 2.0 of �Blockchain Technology

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Bitcoin 2.0

#1 The next generation of bitcoin developments

#2 Extending the flexibility, empower & utility of blockchain technology

#3 Wider range of digital transactions

#4 A complete multi asset economy

Using the power of blockchain tech for new use-cases other than currency�

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The Concept

Colored Coins is coloring a fraction of a bitcoin in order to represent digital assets. These digital assets could represent variety of smart properties in hundreds of potential use cases.

Bitcoin has revolutionized currency by creating a medium of exchange that can stored and transferred digitally without reliance on any single third party, with overreaching implications for efficiency and security. Colored Coins aims to extend these abilities; it would allow handling arbitrary digital tokens in much the same way that bitcoins are handled, and in particular easily trading them for digital currencies.

What characterizes colored bitcoins in comparison with other methods is that it is entirely built on top of the infrastructure of Bitcoin (or some other blockchain-based currency) – the tokens are any bitcoins that can be traced back to a particular output, and the transactions in which tokens are moved are Bitcoin transactions, recognized as normal transactions by oblivious Bitcoin nodes but must satisfy additional requirements to be considered legitimate by color-aware nodes.

By using Colored Coins, anyone can now create/issue a digital asset, define it by attaching value to it and add unlimited amount of data to describe it. This data could contain all sorts of information about the asset like: track record, history, description, validity, expiry date and any information the issuer finds relevant. Moreover, the issuer can add more metadata even after the original issuance. �

A digital asset could be almost anything, from digital entities to tangible items like company shares (digital), a gold bar that is claimed to a certain individual (proof of ownership) or a concert ticket.

The issuer of an asset will normally be someone you trust, just as in real life - you will usually buy a car from a reliable company (with a proven reputation) or put your money in a trustable authorized Bank. The difference here that the digital asset represents and ensures the proof of your ownership of it, now you can securely send it independently to anyone whenever you choose.

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Big Potential - Big Innovations

Where Dreams Finds Their Digital Soul Mates

�

Commodities

Certificates

Originality Validation

Ownership Identity

Shares / Bonds

Voting

And another ± 100 use cases….

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Why Colored Coins

#1 Low transaction fees

#2 Zero confirmation on transactions

#3 The power of the miners

#4 No extra currency layer (XCP, MSC)

#5 Supported by core BTC developers

#6 Support & Establishment

#7 No changes over Bitcoin

1. Colored Coins are very general. Virtually any kind of asset or contract can be represented using them.

2. They can be stored digitally without needing a third party. In particular, the full force of the Bitcoin scripting language can be mustered for their safe storage, such as multi-signature transactions.

3. They can be transferred digitally to a new owner with no need for central authorization, which has implications for ease of use, efficiency and availability.

4. They can be exchanged for other Colored Coins or uncolored bitcoins in a single atomic transaction – meaning there is no counterparty risk, even without blockchain confirmations. And once again the entire range of scripting options is available to allow more complex trades, such as exchanging for coins of a different blockchain with a similar security guarantee, or automated escrow.

5. Properly used, ownership of Colored Coins can be made anonymous, while still enjoying the benefits of ownership.

6. The infrastructure of technology, software, hardware and services which powers Bitcoin carries naturally to benefiting ColoredCoins. Technical challenges that are overcome with Bitcoin translate to the ColoredCoins platform; software for handling Bitcoin can be used, with or without patching, to handle ColoredCoins; mining hardware which synchronizes Bitcoin transactions automatically also synchronizes ColoredCoins transactions; and various Bitcoin-related services can be used in the context of ColoredCoins, sometimes while remaining color-unaware. 3

7. The intuitions behind dealing with Bitcoin translate to understanding the ColoredCoin platform, and together they form the “common language”, on both discussion and software levels, to tie up the various applications.

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Creating the Colored Coins �Open Source Community

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New Implementation

A new Colored Coins implementation, started by Colu, �was released in order to give the community a more robust experience, capabilities and tool when issuing digital assets on �top of the Blockchain.

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New Implementation Benefits

Better metadata handling using torrents
Better Performance & efficiency
Low Prices & minimal bloat
Support for zero confirmation transactions
Smart Contracts capabilities

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New Implementation - Smart Contracts

Time validation - define the asset to be valid for a specific/limited �amount of time
Transferability specifications - asset can be sent or shared only �with specific people
Fees - define fees (from the issuer side) for each transaction on �sending an asset
Minter - Multiple users can issue and reissue assets (multiple keys)

Colored Coins new implementation includes another powerful tool - �Rule Tool - which enables an issuer to generate smart assets with additional features and capabilities such:

Time validation�For example: A conference room rental - your digital reservation ticket will be usable only from 3 - 5pm according to the order.
Transferability�For example: Financial tradings - define that only authorised investors could trade it
Fees �For example: Ticketing - secondary market - a ticketing company can now track tickets that were sold to a second buyer and can charge additional fee for every transaction
Minter �For example: Broadcasting rights - an international cable television network can send the broadcasting rights to multiple channels and they can also be authorised to issue the rights to their regional local stations. �Multisig - the option to define the number of signatures (from the authorised holders) in order to approve a certain action like giving the broadcasting rights.
More rules to come…��The Rule Tool and its capabilities are already embedded in the implementation and in the future developers will be able to add their own rules suggestions to it.

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The value of digital assets must be backed by the issuer commitment that the holder of the asset can always redeem it in the physical world for the value it represents.

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Use Cases

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The Great Use Cases Index

Financial Instruments	Records	Access (Ownership)
Currency	Records of: Spending, Trading, Mortgage	Security Tokens
Private Equities	Certifications: Business Licenses Birth/Death certificates, Passports	Keys to: Homes and Hotel Rooms
Public Equities	Voter IDs	Online Identities
Bonds	Health / Safety Inspections	Reservations (restaurants, hotels, queues etc)
Derivatives (futures, forwards, swaps, options and more complex variations)	Building permits	Vouchers
Commodities	Government/non-profit accounting/transparency	Music/Movies/Book Licenses/Softwares (DRM)

click for full list

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Use Case #1: Ownership Documentations/ID

Bob is selling his car and wants to deliver the keys and ownership from the comfort of his home

�

Issuing tokens representing ownership of the car
Car will ignite only if it detects that the driver actually holds the tokens
Bob sends the tokens and get paid on the same transaction in real time

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Use Case #2: Ticketing

Alice is trying to buy a second hand ticket to a music concert 5 hours before the show

Quick ownership transfer using a digital asset wallet
No fraud validation - be sure it’s an original
Resources saver - time and money

Another great (and common!) use case concerning ownerships transferable assets very easy

True story: one was trying to get a ticket for a Lady Gaga concert on the last minute. He was looking to buy a second hand one online since he wanted to get the better price.

1. He didn’t know the seller, didn’t know if the ticket was the original the production company issued. �2. In order to get it, he had to literally drive across town, wasting time, energy and travelling money/car gas all this for one piece of paper.

What could happen if it was digitally issued: he could have saved all that trouble and hassle in one click of a button.

For cases when a ticket is being sent via email with a barcode- the greater benefits would be: making the transaction in one click (money still need switch hands)

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Use Case #3: Financial Instruments

Joe wants to take his company public - IPO �

Issuing shares and delivering them straight to your new investors
Shares will be held directly by investors and will easily enable them �to keep track of their investment, vote, or receive dividends
Investors can sell or buy new shares fast - P2P
Blockchain technology provides extensive integrity, auditability, �governance and transfer of ownership capabilities

Major benefits with this use-case would be:

Low transaction fees!
Proof of ownership - today, you don’t really get a certificate for owning a share
Transferability via P2P in a fast way (important) - Cutting a lot of parties in the chain (brokers, stock exchanges, banks, etc.) - cutting cost to the business and investor
Dividends will be received directly to the investor’s wallet (as well as voting rights)
Various financial products will be tradable among themselves (today: share<> money, blockchain: share<>bond<>money

Relevant financial products: private/public shares, bonds, etfs, cfds, derivatives and more…

Nasdaq is using ColoredCoins to experiment with the blockchain.

http://www.nasdaq.com/press-release/nasdaq-launches-enterprisewide-blockchain-technology-initiative-20150511-00485

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Use Case #4: Voting

Digital Democracy - a government is interested to enable voting on top of the Blockchain

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Every vote being recorded on the Blockchain
Transparency into the voting process
Real time results
Modernizing the democratic process
Secured
Resources saver

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Summary 0.2

#1 Security - Bonds that could potentially be stolen from a personal safe

#2 Transparency - Copyrights - avoiding intellectual property violations

#3 Consensus - Voting Records - keeping the democratic process

#4 Traceability - Art Certificates - validating their originality and track record

The Main Advantages of Using Blockchain for Issuing Digital Assets

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Colored Coins Open Source Community

Twitter

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Become an Ambassador

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Thank You!