<s>
Colored	B-Protocol
Coins	I-Protocol
is	O
an	O
open-source	B-License
protocol	O
built	O
on	O
the	O
Bitcoin	B-General_Concept
2.0	O
that	O
allows	O
users	O
to	O
represent	O
and	O
manipulate	O
immutable	O
digital	O
resources	O
on	O
top	O
of	O
Bitcoin	B-General_Concept
transactions	O
.	O
</s>
<s>
They	O
are	O
a	O
class	O
of	O
methods	O
for	O
representing	O
and	O
maintaining	O
real-world	O
assets	O
on	O
the	O
Bitcoin	B-General_Concept
blockchain	B-Application
,	O
which	O
may	O
be	O
used	O
to	O
establish	O
asset	O
ownership	O
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
are	O
bitcoins	B-General_Concept
with	O
a	O
mark	O
on	O
them	O
that	O
specifies	O
what	O
they	O
may	O
be	O
used	O
for	O
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
are	O
also	O
considered	O
the	O
initial	O
step	O
toward	O
NFTs	O
built	O
on	O
top	O
of	O
the	O
Bitcoin	B-General_Concept
network	I-General_Concept
.	O
</s>
<s>
Although	O
bitcoins	B-General_Concept
are	O
fungible	O
,	O
they	O
can	O
be	O
marked	O
to	O
be	O
distinguished	O
from	O
other	O
bitcoins	B-General_Concept
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
aim	O
to	O
lower	O
transaction	O
costs	O
and	O
complexity	O
so	O
that	O
an	O
asset	O
's	O
owner	O
may	O
transfer	O
ownership	O
as	O
quickly	O
as	O
a	O
Bitcoin	B-General_Concept
transaction	O
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
are	O
commonly	O
referred	O
to	O
as	O
metacoins	O
because	O
this	O
imaginative	O
coloring	O
is	O
the	O
addition	O
of	O
metadata	O
.	O
</s>
<s>
This	O
enables	O
a	O
portion	O
of	O
a	O
digital	O
representation	O
of	O
a	O
physical	O
item	O
to	O
be	O
encoded	O
into	O
a	O
Bitcoin	B-General_Concept
address	O
.	O
</s>
<s>
The	O
value	O
of	O
the	O
colored	B-Protocol
coins	I-Protocol
is	O
independent	O
of	O
the	O
current	O
prices	O
of	O
the	O
bitcoin	B-General_Concept
;	O
instead	O
,	O
it	O
is	O
determined	O
by	O
the	O
value	O
of	O
the	O
underlying	O
actual	O
asset/service	O
and	O
the	O
issuer	O
's	O
desire	O
and	O
capacity	O
to	O
redeem	O
the	O
colored	B-Protocol
coins	I-Protocol
in	O
return	O
for	O
the	O
equivalent	O
actual	O
asset	O
or	O
service	O
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
arose	O
due	O
to	O
the	O
necessity	O
to	O
generate	O
new	O
tokens	O
and	O
move	O
assets	O
on	O
the	O
Bitcoin	B-General_Concept
network	I-General_Concept
.	O
</s>
<s>
Yoni	O
Assia	O
,	O
the	O
CEO	O
of	O
eToro	O
,	O
was	O
the	O
first	O
to	O
suggest	O
Colored	B-Protocol
coins	I-Protocol
in	O
an	O
article	O
published	O
on	O
March	O
27	O
,	O
2012	O
.	O
</s>
<s>
In	O
the	O
article	O
titled	O
bitcoin	B-General_Concept
2.X	O
(	O
aka	O
Colored	O
bitcoin	B-General_Concept
)	O
,	O
Assia	O
claimed	O
that	O
the	O
initial	O
specifications	O
that	O
bitcoins	B-General_Concept
transmitted	O
using	O
the	O
"	O
Genesis	O
Transaction	O
"	O
protocol	O
are	O
recognizable	O
,	O
distinctive	O
,	O
and	O
trackable	O
on	O
the	O
ledger	O
.	O
</s>
<s>
The	O
idea	O
was	O
growing	O
,	O
and	O
on	O
forums	O
such	O
as	O
Bitcointalk	O
,	O
the	O
concept	O
of	O
colored	B-Protocol
coins	I-Protocol
started	O
to	O
take	O
form	O
and	O
gain	O
traction	O
.	O
</s>
<s>
The	O
next	O
year	O
,	O
in	O
2013	O
,	O
Assia	O
collaborated	O
with	O
Buterin	O
and	O
two	O
others	O
,	O
Lior	O
Hakim	O
and	O
Meni	O
Rosenfeld	O
,	O
to	O
write	O
Color	O
Coins	O
—	O
BitcoinX	B-Protocol
,	O
which	O
explored	O
the	O
potential	O
possibilities	O
of	O
colored	B-Protocol
coins	I-Protocol
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
originated	O
as	O
an	O
afterthought	O
by	O
Bitcoin	B-General_Concept
miners	O
.	O
</s>
<s>
The	O
blockchain	B-Application
's	O
data	O
space	O
had	O
been	O
utilized	O
to	O
encode	O
numerous	O
metadata	O
values	O
.	O
</s>
<s>
The	O
Bitcoin	B-General_Concept
team	O
fixed	O
the	O
problem	O
by	O
including	O
a	O
40-byte	O
area	O
for	O
storing	O
data	O
as	O
a	O
transaction	O
,	O
as	O
well	O
as	O
an	O
encrypted	O
ledger	O
of	O
transactions	O
and	O
information	O
about	O
the	O
coin	O
's	O
genesis	O
.	O
</s>
<s>
While	O
bitcoin	B-General_Concept
was	O
developed	O
to	O
be	O
a	O
cryptocurrency	O
,	O
its	O
scripting	O
language	O
makes	O
it	O
possible	O
to	O
associate	O
metadata	O
with	O
individual	O
transactions	O
.	O
</s>
<s>
By	O
precisely	O
tracing	O
the	O
origin	O
of	O
a	O
particular	O
bitcoin	B-General_Concept
,	O
it	O
is	O
possible	O
to	O
distinguish	O
a	O
group	O
of	O
bitcoins	B-General_Concept
from	O
the	O
others	O
,	O
a	O
process	O
known	O
as	O
bitcoin	B-General_Concept
coloring	O
(	O
a	O
term	O
that	O
served	O
as	O
a	O
basis	O
to	O
the	O
name	O
of	O
the	O
Colored	B-Protocol
Coins	I-Protocol
protocol	O
)	O
.	O
</s>
<s>
Through	O
the	O
oversight	O
of	O
an	O
issuing	O
agent	O
or	O
a	O
public	O
agreement	O
,	O
special	O
properties	O
can	O
be	O
associated	O
with	O
colored	O
bitcoins	B-General_Concept
,	O
giving	O
them	O
value	O
beyond	O
the	O
currency	O
's	O
value	O
.	O
</s>
<s>
One	O
way	O
of	O
looking	O
at	O
this	O
is	O
from	O
the	O
abstraction	O
that	O
there	O
are	O
two	O
distinct	O
layers	O
on	O
top	O
of	O
bitcoin	B-General_Concept
:	O
the	O
lower	O
layer	O
referring	O
to	O
the	O
transaction	O
network	O
based	O
on	O
cryptographic	O
technology	O
and	O
an	O
upper	O
layer	O
that	O
constitutes	O
a	O
distribution	O
network	O
of	O
values	O
​​encapsulated	O
in	O
the	O
design	O
of	O
colored	B-Protocol
coins	I-Protocol
.	O
</s>
<s>
Due	O
to	O
the	O
fact	O
that	O
colored	B-Protocol
coins	I-Protocol
are	O
implemented	O
on	O
top	O
of	O
the	O
Bitcoin	B-General_Concept
infrastructure	O
,	O
allow	O
atomic	O
transactions	O
(	O
exchanged	O
for	O
each	O
other	O
in	O
a	O
single	O
transaction	O
)	O
and	O
can	O
be	O
transferred	O
without	O
the	O
involvement	O
of	O
a	O
third	O
party	O
,	O
they	O
enable	O
the	O
decentralized	O
exchange	O
of	O
items	O
that	O
would	O
not	O
be	O
possible	O
through	O
traditional	O
means	O
.	O
</s>
<s>
To	O
create	O
colored	B-Protocol
coins	I-Protocol
,	O
"	O
colored	O
"	O
addresses	O
must	O
be	O
created	O
and	O
stored	O
in	O
"	O
colored	O
"	O
wallets	O
controlled	O
by	O
color-aware	O
clients	O
such	O
as	O
Coinprism	O
,	O
Coloredcoins	O
,	O
through	O
Colu	O
,	O
or	O
CoinSpark	O
.	O
</s>
<s>
The	O
"	O
coloring	O
"	O
process	O
is	O
an	O
abstract	O
idea	O
that	O
indicates	O
an	O
asset	O
description	O
,	O
some	O
general	O
instructions	O
symbol	O
,	O
and	O
a	O
unique	O
hash	O
associated	O
with	O
the	O
Bitcoin	B-General_Concept
addresses	O
.	O
</s>
<s>
This	O
was	O
Bitcoin	B-General_Concept
's	O
first	O
working	O
Colored	O
Coin	O
Protocol	O
.	O
</s>
<s>
This	O
protocol	O
,	O
also	O
known	O
as	O
the	O
Open	O
Assets	O
Protocol	O
,	O
is	O
open	B-License
source	I-License
and	O
may	O
be	O
integrated	O
into	O
existing	O
systems	O
by	O
anyone	O
.	O
</s>
<s>
On	O
July	O
3	O
,	O
2014	O
,	O
ChromaWay	O
developed	O
the	O
Enhanced	O
Padded-Order-Based	O
Coloring	O
protocol	O
(	O
EPOBC	O
)	O
,	O
which	O
simplified	O
the	O
process	O
of	O
manufacturing	O
colored	B-Protocol
coins	I-Protocol
for	O
developers	O
,	O
and	O
was	O
one	O
of	O
the	O
first	O
to	O
employ	O
Bitcoin	B-General_Concept
Script	O
's	O
new	O
OP	O
RETURN	O
function	O
.	O
</s>
<s>
In	O
2015	O
,	O
Colu	O
created	O
the	O
ColoredCoins	O
platforms	O
and	O
Colored	B-Protocol
Coins	I-Protocol
protocol	O
allowing	O
users	O
to	O
build	O
digital	O
assets	O
on	O
top	O
of	O
the	O
Bitcoin	B-General_Concept
blockchain	B-Application
using	O
the	O
Bitcoin	B-General_Concept
2.0	O
protocol	O
.	O
</s>
<s>
Colored	O
coin	O
functions	O
by	O
adding	O
a	O
4th	O
layer	O
to	O
the	O
Bitcoin	B-General_Concept
blockchain	B-Application
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
were	O
the	O
original	O
notion	O
for	O
representing	O
assets	O
on	O
the	O
blockchain	B-Application
.	O
</s>
<s>
They	O
are	O
not	O
widely	O
used	O
because	O
the	O
transaction	O
structure	O
required	O
to	O
represent	O
colored	B-Protocol
coins	I-Protocol
relies	O
on	O
unspent	B-Protocol
transaction	I-Protocol
outputs	I-Protocol
(	O
UTXO	B-Protocol
)	O
,	O
which	O
Ethereum-based	O
blockchain	B-Application
systems	O
do	O
not	O
support	O
.	O
</s>
<s>
For	O
example	O
,	O
for	O
the	O
Bitcoin	B-General_Concept
blockchain	B-Application
,	O
each	O
Satoshi	O
(	O
the	O
lowest	O
potential	O
value	O
of	O
Bitcoin	B-General_Concept
)	O
might	O
represent	O
a	O
separate	O
item	O
.	O
</s>
<s>
There	O
is	O
promise	O
in	O
using	O
colored	B-Protocol
coins	I-Protocol
as	O
an	O
effective	O
way	O
of	O
tracing	O
in	O
production	O
situations	O
since	O
the	O
transactions	O
can	O
be	O
merged	O
or	O
divided	O
into	O
new	O
transactions	O
and	O
the	O
color	O
can	O
be	O
readily	O
altered	O
after	O
each	O
transaction	O
.	O
</s>
<s>
Finally	O
,	O
current	O
tools	O
,	O
like	O
as	O
blockchain	B-Application
explorers	O
,	O
make	O
it	O
simple	O
to	O
view	O
and	O
analyze	O
transactions	O
.	O
</s>
<s>
The	O
nature	O
of	O
colored	B-Protocol
coins	I-Protocol
makes	O
them	O
the	O
first	O
non-fungible	O
tokens	O
to	O
be	O
created	O
on	O
the	O
Bitcoin	B-General_Concept
blockchain	B-Application
,	O
albeit	O
with	O
limited	O
features	O
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
are	O
transferrable	O
in	O
what	O
is	O
known	O
as	O
atomic	O
transactions	O
.	O
</s>
<s>
In	O
this	O
way	O
,	O
colored	B-Protocol
coins	I-Protocol
allow	O
traditional	O
assets	O
to	O
be	O
decentralized	O
.	O
</s>
<s>
Colored	O
coin	O
uses	O
an	O
open-source	B-License
,	O
decentralized	O
peer-to-peer	O
transaction	O
protocol	O
built	O
on	O
top	O
of	O
WEB	O
2.0	O
.	O
</s>
<s>
Despite	O
being	O
created	O
to	O
be	O
a	O
protocol	O
for	O
monetary	O
transactions	O
,	O
one	O
of	O
the	O
Bitcoin	B-General_Concept
's	O
advantages	O
is	O
a	O
secure	O
transaction	O
protocol	O
not	O
controlled	O
by	O
a	O
central	O
authority	O
.	O
</s>
<s>
This	O
is	O
possible	O
through	O
the	O
use	O
of	O
Blockchain	B-Application
,	O
which	O
maintains	O
track	O
of	O
all	O
Bitcoin	B-General_Concept
transactions	O
worldwide	O
.	O
</s>
<s>
A	O
set	O
of	O
inputs	O
such	O
that	O
each	O
input	O
has	O
(	O
a	O
)	O
a	O
Transaction	O
Hash	O
and	O
Output	O
Index	O
of	O
a	O
previous	O
transaction	O
carried	O
out	O
on	O
that	O
bitcoin	B-General_Concept
and	O
(	O
b	O
)	O
a	O
digital	O
signature	O
that	O
serves	O
as	O
cryptographic	O
proof	O
that	O
that	O
input	O
address	O
authorizes	O
the	O
transaction	O
.	O
</s>
<s>
An	O
output	O
set	O
such	O
that	O
each	O
output	O
has	O
(	O
a	O
)	O
the	O
bitcoin	B-General_Concept
value	O
to	O
be	O
transferred	O
to	O
that	O
output	O
and	O
(	O
b	O
)	O
a	O
script	O
that	O
maps	O
a	O
single	O
address	O
to	O
that	O
output	O
.	O
</s>
<s>
The	O
manipulation	O
of	O
colored	B-Protocol
coins	I-Protocol
can	O
be	O
performed	O
through	O
several	O
algorithms	O
,	O
which	O
create	O
a	O
set	O
of	O
rules	O
to	O
be	O
applied	O
to	O
the	O
inputs	O
and	O
outputs	O
of	O
Bitcoin	B-General_Concept
transactions	O
:	O
</s>
<s>
At	O
a	O
given	O
moment	O
,	O
a	O
digital	O
resource	O
is	O
associated	O
with	O
the	O
output	O
of	O
a	O
Bitcoin	B-General_Concept
transaction	O
,	O
called	O
Genesis	O
Transactions	O
.	O
</s>
<s>
The	O
output	O
of	O
this	O
transaction	O
(	O
currency	O
)	O
belongs	O
to	O
the	O
initial	O
owner	O
recorded	O
in	O
the	O
system	O
(	O
in	O
a	O
case	O
of	O
a	O
jewelry	O
store	O
associating	O
its	O
jewelry	O
with	O
digital	O
resources	O
,	O
the	O
newly	O
colored	B-Protocol
coins	I-Protocol
will	O
belong	O
to	O
the	O
store	O
)	O
.	O
</s>
<s>
The	O
Bitcoin	B-General_Concept
blockchain	B-Application
has	O
tracking	O
of	O
the	O
public	O
keys	O
associated	O
with	O
each	O
address	O
,	O
such	O
that	O
the	O
owner	O
of	O
the	O
coin	O
can	O
prove	O
ownership	O
by	O
sending	O
a	O
message	O
with	O
the	O
private	O
key	O
associated	O
with	O
that	O
address	O
.	O
</s>
<s>
It	O
is	O
important	O
to	O
note	O
that	O
the	O
nSequence	O
field	O
is	O
always	O
present	O
in	O
Bitcoin	B-General_Concept
transactions	O
,	O
but	O
it	O
is	O
not	O
used	O
,	O
so	O
it	O
does	O
not	O
generate	O
an	O
overhead	O
for	O
the	O
coloring	O
process	O
.	O
</s>
<s>
Transfer	O
transactions	O
are	O
used	O
to	O
send	O
colored	B-Protocol
coins	I-Protocol
from	O
one	O
address	O
to	O
another	O
.	O
</s>
<s>
If	O
colored	B-Protocol
coins	I-Protocol
are	O
used	O
as	O
input	O
for	O
transactions	O
that	O
do	O
not	O
follow	O
the	O
transfer	O
protocol	O
,	O
the	O
value	O
associated	O
with	O
their	O
color	O
is	O
lost	O
.	O
</s>
<s>
Determining	O
a	O
way	O
to	O
transfer	O
colored	B-Protocol
coins	I-Protocol
from	O
one	O
Bitcoin	B-General_Concept
address	O
to	O
another	O
is	O
the	O
most	O
complex	O
part	O
of	O
the	O
colored	B-Protocol
coins	I-Protocol
protocol	O
.	O
</s>
<s>
For	O
transactions	O
with	O
only	O
one	O
input	O
and	O
one	O
output	O
,	O
it	O
is	O
easy	O
to	O
determine	O
that	O
the	O
color	O
of	O
the	O
output	O
coins	O
is	O
the	O
same	O
color	O
that	O
was	O
received	O
by	O
the	O
input	O
address	O
,	O
since	O
a	O
Bitcoin	B-General_Concept
address	O
can	O
only	O
handle	O
a	O
single	O
color	O
value	O
.	O
</s>
<s>
However	O
,	O
in	O
transactions	O
with	O
multiple	O
inputs	O
and	O
outputs	O
,	O
determining	O
which	O
colored	B-Protocol
coins	I-Protocol
of	O
inputs	O
correspond	O
to	O
which	O
outputs	O
become	O
a	O
more	O
complex	O
task	O
.	O
</s>
<s>
On	O
the	O
left	O
side	O
there	O
are	O
inputs	O
,	O
each	O
a	O
width	O
proportional	O
to	O
its	O
value	O
,	O
on	O
the	O
right	O
side	O
there	O
are	O
outputs	O
with	O
values	O
proportional	O
to	O
their	O
bitcoin	B-General_Concept
values	O
.	O
</s>
<s>
A	O
single	O
Bitcoin	B-General_Concept
address	O
cannot	O
handle	O
coins	O
of	O
different	O
colors	O
.	O
</s>
<s>
In	O
essence	O
,	O
the	O
algorithm	O
has	O
the	O
same	O
principle	O
as	O
the	O
OBC	O
,	O
however	O
,	O
treating	O
each	O
output	O
as	O
containing	O
a	O
pad	O
of	O
a	O
certain	O
number	O
of	O
colorless	O
bitcoins	B-General_Concept
,	O
with	O
the	O
colored	B-Protocol
coins	I-Protocol
following	O
them	O
.	O
</s>
<s>
The	O
Bitcoin	B-General_Concept
network	I-General_Concept
's	O
decentralized	O
nature	O
indicates	O
that	O
its	O
security	O
does	O
not	O
need	O
dependence	O
on	O
trusted	O
parties	O
and	O
that	O
its	O
players	O
may	O
operate	O
anonymously	O
provided	O
adequate	O
safeguards	O
are	O
adopted	O
.	O
</s>
<s>
Colored	B-Protocol
Coins	I-Protocol
protocols	O
adoption	O
enables	O
the	O
integration	O
of	O
decentralized	O
stock	O
exchanges	O
and	O
other	O
financial	O
functionality	O
into	O
Bitcoin	B-General_Concept
such	O
as	O
certifying	O
credentials	O
(	O
like	O
academic	O
certificates	O
)	O
,	O
or	O
establishing	O
the	O
existence	O
of	O
digital	O
documents	O
.	O
</s>
<s>
Smart	B-Application
property	I-Application
:	O
For	O
example	O
,	O
a	O
product	O
rental	O
company	O
can	O
release	O
a	O
colored	O
coin	O
to	O
represent	O
their	O
products	O
,	O
such	O
as	O
a	O
car	O
.	O
</s>
<s>
Issue	O
of	O
shares	O
:	O
A	O
company	O
can	O
issue	O
its	O
shares	O
through	O
colored	B-Protocol
coins	I-Protocol
,	O
taking	O
advantage	O
of	O
the	O
Bitcoin	B-General_Concept
infrastructure	O
to	O
manage	O
activities	O
such	O
as	O
voting	O
,	O
exchange	O
and	O
payment	O
of	O
dividends	O
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
may	O
also	O
be	O
used	O
to	O
form	O
Distributed	O
Collaborative	O
Organizations	O
(	O
DCOs	O
)	O
and	O
Decentralized	B-Operating_System
Autonomous	I-Operating_System
Organizations	I-Operating_System
(	O
DAOs	O
)	O
,	O
which	O
are	O
acting	O
as	O
virtual	O
corporations	O
with	O
shareholders	O
.	O
</s>
<s>
In	O
such	O
cases	O
,	O
the	O
blockchain	B-Application
may	O
assist	O
in	O
keeping	O
track	O
of	O
a	O
company	O
's	O
ownership	O
structure	O
as	O
well	O
as	O
creating	O
and	O
distributing	O
DCO	O
shares	O
in	O
a	O
transparent	O
and	O
safe	O
manner	O
.	O
</s>
<s>
Issue	O
of	O
coupons	O
:	O
A	O
company	O
can	O
issue	O
promotional	O
coupons	O
or	O
loyalty	O
points	O
among	O
its	O
customers	O
in	O
the	O
form	O
of	O
colored	B-Protocol
coins	I-Protocol
.	O
</s>
<s>
Similar	O
to	O
how	O
collectors	O
acquire	O
and	O
sell	O
paintings	O
,	O
colored	B-Protocol
coins	I-Protocol
enable	O
managing	O
digital	O
resources	O
in	O
a	O
similar	O
way	O
,	O
such	O
as	O
e-books	O
,	O
music	O
,	O
digital	O
games	O
and	O
software	O
,	O
guaranteeing	O
ownership	O
of	O
the	O
resource	O
to	O
the	O
owner	O
of	O
the	O
coin	O
.	O
</s>
<s>
As	O
long	O
as	O
the	O
provider	O
's	O
identity	O
is	O
protected	O
by	O
the	O
legal	O
framework	O
,	O
colored	B-Protocol
coins	I-Protocol
may	O
be	O
used	O
to	O
transfer	O
any	O
digitally	O
transferable	O
right	O
.	O
</s>
<s>
The	O
contract	O
and	O
any	O
payments	O
linked	O
to	O
it	O
are	O
recorded	O
on	O
the	O
blockchain	B-Application
using	O
a	O
unique	O
cryptographic	O
key	O
that	O
identifies	O
the	O
rightful	O
owner	O
of	O
the	O
currency	O
.	O
</s>
<s>
Private	O
key	O
holders	O
might	O
then	O
transfer	O
the	O
asset	O
directly	O
to	O
other	O
persons	O
or	O
corporations	O
through	O
a	O
public	O
blockchain	B-Application
.	O
</s>
<s>
Users	O
may	O
trade	O
and	O
manage	O
all	O
asset	O
classes	O
in	O
a	O
somewhat	O
decentralized	O
framework	O
with	O
a	O
minute	O
amount	O
of	O
colored	O
Bitcoin	B-General_Concept
,	O
according	O
to	O
marketing	O
literature	O
,	O
rather	O
than	O
needing	O
to	O
send	O
hundreds	O
or	O
even	O
thousands	O
of	O
bitcoins	B-General_Concept
in	O
return	O
for	O
an	O
item	O
or	O
service	O
.	O
</s>
<s>
Bonds	O
:	O
A	O
special	O
case	O
of	O
a	O
deterministic	O
contract	O
,	O
bonds	O
can	O
be	O
issued	O
with	O
a	O
down	O
payment	O
amount	O
and	O
an	O
installment	O
schedule	O
in	O
bitcoin	B-General_Concept
,	O
another	O
currency	O
or	O
commodity	O
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
can	O
be	O
handled	O
through	O
wallets	O
in	O
the	O
same	O
manner	O
as	O
Bitcoin	B-General_Concept
monetary	O
resources	O
can	O
be	O
managed	O
through	O
bitcoin	B-General_Concept
wallets	O
.	O
</s>
<s>
Wallets	O
are	O
used	O
to	O
manage	O
the	O
addresses	O
associated	O
with	O
each	O
pair	O
of	O
keys	O
(	O
public	O
and	O
private	O
)	O
of	O
a	O
Bitcoin	B-General_Concept
user	O
,	O
as	O
well	O
as	O
the	O
transactions	O
associated	O
with	O
their	O
set	O
of	O
addresses	O
.	O
</s>
<s>
Rather	O
than	O
dealing	O
with	O
cryptocurrencies	O
,	O
colored	O
coin	O
wallets	O
add	O
a	O
layer	O
of	O
abstraction	O
,	O
managing	O
digital	O
assets	O
,	O
such	O
as	O
stocks	O
,	O
altcoins	O
,	O
which	O
are	O
created	O
on	O
the	O
Blockchain	B-Application
,	O
intellectual	O
property	O
and	O
other	O
resources	O
.	O
</s>
<s>
While	O
bitcoin	B-General_Concept
wallets	O
are	O
required	O
to	O
use	O
a	O
unique	O
Bitcoin	B-General_Concept
address	O
for	O
each	O
transaction	O
,	O
colored	O
coin	O
wallets	O
frequently	O
reuse	O
their	O
addresses	O
in	O
order	O
to	O
re-issue	O
coins	O
of	O
the	O
same	O
color	O
.	O
</s>
<s>
To	O
issue	O
colored	B-Protocol
coins	I-Protocol
,	O
colored	O
addresses	O
must	O
be	O
generated	O
and	O
stored	O
in	O
colored	O
wallets	O
administered	O
by	O
a	O
color-aware	O
client	O
such	O
as	O
Coinprism	O
.	O
</s>
<s>
There	O
is	O
,	O
however	O
,	O
some	O
concern	O
about	O
the	O
interoperability	O
of	O
the	O
existing	O
implementations	O
,	O
owing	O
to	O
the	O
fact	O
that	O
colored	B-Protocol
coins	I-Protocol
transactions	O
are	O
operationalized	O
using	O
the	O
variety	O
of	O
different	O
algorithms	O
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
require	O
a	O
unified	O
wallet	O
that	O
can	O
distinguish	O
between	O
items	O
other	O
than	O
bitcoins	B-General_Concept
.	O
</s>
<s>
In	O
June	O
2015	O
,	O
a	O
Torrent-based	O
version	O
of	O
Colored	B-Protocol
Coins	I-Protocol
was	O
developed	O
to	O
cover	O
the	O
protocol	O
's	O
use	O
while	O
Bitcoin	B-General_Concept
has	O
not	O
yet	O
been	O
widely	O
adopted	O
by	O
the	O
market	O
.	O
</s>
<s>
Making	O
the	O
protocol	O
compatible	O
amongst	O
different	O
Bitcoin	B-General_Concept
implementations	O
is	O
one	O
approach	O
to	O
increase	O
the	O
usage	O
of	O
Bitcoin	B-General_Concept
for	O
digital	O
asset	O
management	O
.	O
</s>
<s>
A	O
smart	B-Application
property	I-Application
or	O
an	O
item	O
with	O
an	O
off-chain	O
identifier	O
that	O
is	O
transferred	O
via	O
blockchain	B-Application
remains	O
subject	O
to	O
legal	O
interpretation	O
.	O
</s>
<s>
Colored	B-Protocol
coins	I-Protocol
and	O
other	O
virtual	O
currency	O
are	O
presently	O
not	O
recognized	O
as	O
evidence	O
of	O
ownership	O
by	O
any	O
government	O
agency	O
in	O
the	O
United	O
States	O
.	O
</s>
<s>
There	O
's	O
a	O
legal	O
challenge	O
with	O
regard	O
to	O
the	O
transfer	O
of	O
common	O
stock	O
ownership	O
using	O
blockchain	B-Application
.	O
</s>
<s>
Due	O
to	O
the	O
fact	O
that	O
the	O
rights	O
to	O
receive	O
notifications	O
,	O
vote	O
,	O
receive	O
dividends	O
,	O
and	O
exercise	O
appraisal	O
rights	O
are	O
restricted	O
to	O
registered	O
owners	O
,	O
establishing	O
ownership	O
is	O
likely	O
even	O
more	O
critical	O
for	O
blockchain	B-Application
stock	O
.	O
</s>
<s>
As	O
virtual	O
tokens	O
colored	B-Protocol
coins	I-Protocol
cannot	O
compel	O
the	O
real	O
world	O
to	O
meet	O
the	O
obligations	O
made	O
when	O
they	O
were	O
issued	O
.	O
</s>
<s>
Using	O
virtual	O
tokens	O
in	O
a	O
transaction	O
that	O
does	O
not	O
conform	O
with	O
the	O
rules	O
of	O
colored	O
currencies	O
(	O
stricter	O
than	O
the	O
rules	O
of	O
blockchain	B-Application
transactions	O
and	O
not	O
mandated	O
by	O
it	O
)	O
destroys	O
the	O
additional	O
meaning	O
,	O
leaving	O
only	O
the	O
token	O
’s	O
monetary	O
worth	O
on	O
the	O
blockchain	B-Application
.	O
</s>
<s>
For	O
instance	O
,	O
the	O
blockchain	B-Application
can	O
record	O
the	O
number	O
of	O
concert	O
tickets	O
that	O
have	O
been	O
issued	O
and	O
the	O
addresses	O
of	O
their	O
owners	O
,	O
but	O
it	O
cannot	O
encode	O
the	O
fact	O
that	O
they	O
represent	O
allowed	O
access	O
to	O
a	O
specific	O
concert	O
at	O
a	O
specific	O
time	O
.	O
</s>
<s>
The	O
speed	O
of	O
transactions	O
and	O
the	O
capabilities	O
of	O
the	O
smart	B-Application
contract	I-Application
procedures	O
utilized	O
by	O
virtual	O
tokens	O
are	O
equivalent	O
to	O
those	O
of	O
the	O
blockchain	B-Application
they	O
are	O
based	O
on	O
.	O
</s>
<s>
Due	O
to	O
the	O
nature	O
of	O
the	O
Bitcoin	B-General_Concept
host	O
network	O
,	O
adding	O
an	O
additional	O
layer	O
is	O
neither	O
simple	O
nor	O
scalable	O
.	O
</s>
<s>
Additionally	O
,	O
it	O
inherits	O
all	O
of	O
the	O
information	O
security	O
and	O
safety	O
concerns	O
of	O
the	O
host	O
blockchain	B-Application
.	O
</s>
<s>
Developing	O
a	O
comprehensive	O
protocol	O
that	O
incorporates	O
asset	O
issuance	O
and	O
native	O
tracking	O
may	O
be	O
a	O
more	O
rigorous	O
and	O
scalable	O
method	O
for	O
creating	O
a	O
blockchain-based	O
asset-tracking	O
system	O
.	O
</s>
<s>
Opposition	O
to	O
the	O
use	O
of	O
Colored	B-Protocol
Coins	I-Protocol
for	O
the	O
treatment	O
of	O
abstracted	O
resources	O
on	O
Bitcoin	B-General_Concept
mainly	O
originates	O
in	O
the	O
financial	O
and	O
banking	O
sectors	O
.	O
</s>
<s>
It	O
is	O
argued	O
that	O
the	O
proof-of-work	O
blockchain-based	O
security	O
system	O
cannot	O
be	O
exported	O
to	O
a	O
regulated	O
financial	O
resolution	O
environment	O
.	O
</s>
<s>
As	O
a	O
result	O
,	O
there	O
is	O
no	O
legal	O
framework	O
for	O
Colored	B-Protocol
Coins	I-Protocol
 '	O
transactions	O
.	O
</s>
<s>
According	O
to	O
institutions	O
that	O
criticize	O
the	O
decentralized	O
transaction	O
system	O
,	O
the	O
legal	O
effect	O
of	O
an	O
individual	O
or	O
entity	O
transferring	O
ownership	O
of	O
a	O
given	O
object	O
to	O
another	O
individual	O
or	O
entity	O
through	O
Bitcoin	B-General_Concept
abstractions	O
is	O
still	O
uncertain	O
.	O
</s>
