An Irish startup has launched a couple of colored coin projects to facilitate the exchange of assets along the Bitcoin block chain with the same ease as the bitcoin currency itself.
Pixode, a company that started in 2010 making mobile games, just announced Tuesday the launch of what it describes as a “Crypto 2.0” platform in Open Assets and a colored coins wallet called Coinprism.
“Colored coins are about taking a fraction of a Bitcoin, and tagging it with a secondary, user-defined value,” founder Flavien Charlon said in a release. “That value can then be stored on the block chain, and transferred simply by transferring the underlying bitcoins.
“This opens a wide range of possibilities. An interesting use case is the ability for a company to issue shares in the form of colored coins, which can then be traded in a purely decentralized way on the Bitcoin block chain. This allows companies to run IPOs on the block chain in minutes, and for the price of a Bitcoin transaction.”
The Open Assets platform could also be applied to smart contracts or precious metals, he said.
Coinprism is one application of Open Assets, a wallet for storing, sending and receiving colored coins. wallet. “Coinprism has a strong focus on security, and private keys are always encrypted on the client before being transmitted to the server,” Charlon said.
Pixode last year also released Predictious, a predictions and derivatives market.
We reached out to Charlon recently to get some details about the projects.
Cointelegraph: What are some other applications you imagine for Coinprism?
Flavien Charlon: Bitcoin exchanges could decide to allow people to withdraw and deposit so-called “USD coins.” Those "USD coins" would be each worth one dollar, redeemable at that exchange. People can then start using that as a payment worth exactly one dollar, so they are not exposed to the volatility of Bitcoin while still getting all the benefits of a decentralized network. This can also allow people to do arbitrage between exchanges without even having to go through the traditional banking system.
As a second example, colored coins can be used as a way to do decentralized and truly anonymous voting. A company like Coca-Cola could distribute "vote coins" by putting a private key on each bottle of Coke they sell, each with one "vote coin." Then at some point, when trying to decide what new product to put to market, they can ask their customers to send their vote coins to either one address if they want the new flavor to be X or to a different address if they prefer the new flavor to be Y. They can then simply count the number of "vote coins" on each address to know what their customers prefer.
Another application of Coinprism and colored coins is loyalty points or air miles. Starbucks could decide to give Starbucks points to their customers when they purchase a coffee in the form of colored coins. Customers could store them on their Bitcoin wallets, send them to their friends and family, or even trade them on the block chain. Those points could then be used to purchase drinks from their shops.
CT: You've done closed beta. What did you learn from that early feedback?
FC: What we have learnt so far is that it is important for us to work closely with companies trying to build on top of the Open Assets platform and enable them as much as we can. Although we cannot name them, a few companies are already integrating colored coins with their service, and this will be key to adoption of the technology.
We think Open Assets is superior to existing metacoin alternatives, and the interest we saw during the beta also tends to confirm that. Those businesses are looking for a way to store assets on the block chain but don't want to depend on a "middleman coin" like Mastercoin or Counterparty. This is why Open Assets is great for them.
CT: Trading assets on the block chain sounds like a regulatory minefield. Is that accurate? What sorts of regulatory issues have you run into?
FC: It varies greatly with the type of assets and jurisdiction. For assets like stocks, it will be primarily up to the company issuing the shares to verify that this is legal in their jurisdiction. This may be challenging in the US because the SEC has tight regulations around this. In Europe and many other countries, however, the regulatory environment is more friendly.
However, one way to go around that issue is to use colored coins for crowd funding and do something similar to what happens on Kickstarter. Investors don't receive actual equity; the colored coins they buy give them the right to receive the product before everyone else (and possibly some other perks). Then, that coin can be sold and bought. Up until the product is released, the coin would have a market price moving up and down, which will give the company a good idea of how excited people are about their product under development. They can also use that information when they finally go to market to find out what price people are really willing to pay for their product.
These types of presales fall outside of the scope of SEC regulations.
CT: Your team launched Predictious about 10 months ago, right? How has the response been? What are some things you learned from that startup?
FC: Yes, we have been running Predictious for about 10 months now. We are seeing growth in the transaction volume on a monthly basis. The most popular markets we have are the markets for predicting the price of bitcoin in the short term (end of the week), as many people like to use this as a way to hedge the risks associated with a bitcoin position.
The most important thing we've learnt is that we need to keep a close relationship with our users. A lot of the services in the crypto world can be sketchy. Users really appreciate a service that stands out from that. One of our area of focus, for example, is a friendly and responsive customer service.