In their simplest forms, Bitcoin, and other cryptocurrencies, are essentially just different forms of money. The purchasing power of these coins is determined solely by how much a purchaser is willing to pay for them, using his/her local currency. A large majority of bitcoin vendors have a dollar value next to the bitcoin price, and even those who only accept bitcoin fluctuate their prices based off of the current exchange rates.
But what if Bitcoins, Dogecoins, Litecoins, and every other coin out there was more than just a set of numbers with an attached dollar value? Colored Coins may very well be the solution. The concept is straightforward. With Colored Coins, users can “color” their coins, giving them a label, an additional set of information. With these labels, coins can be attached to commodities, assets, stocks, and more. Beyond numbers and electricity, Bitcoin and other altcoins can be backed by a real life value using Colored Coins.
Coins that have been colored effectively become tokens. These tokens can be recognized by various parties as representations of stocks, bonds, houses, and just about anything else. By exchanging these tokens, both parties can bypass the regulations, taxes, and restrictions that would normally hinder the trade of the assets they represent.
Colored Coins has launched with bitcoin recently, but has yet to receive major usage. Some altcoin developers have declined integrating the system into their currencies, but many others have considered the implementation. Most notably, Opalcoin has taken measures to apply Colored Coins to their cryptocurrency, and they plan on releasing the system shortly.
Opalcoin, launched in September of 2014, is a cryptocurrency known for its anonymity, or the “opacity” as it is commonly referred to. Anonymity is one of the core values that coin was founded upon, and unique features such as encrypted messaging and opaque addresses give users the tools to maintain their anonymity.
Another goal the developers had early on was to implement a market place free of taxation for the coin. A commodity exchange, where users trade goods and services, rather than money, was one of the first visions for the coin. There is hope that Colored Coins may be the solution to create this system. With Colored Coins, Opalcoin users will be given the tools necessary for anonymously trading gold, bonds, stocks, and anything else via colored Opalcoins.
Colored Coins is a revolutionary system in the cryptocurrency world. One of the major criticisms to altcoins is that they lack any real value outside of what people are willing to pay for them. Colored coins dispels this criticism by giving users the ability to bind their coins to assets. Opalcoin might just be the start Colored Coins needs to gain widespread adoption.