Burstcoin colored coins

In an abstract sense, coloring is a simple tagging technique used to allow distinction, thus coexistence, of various instances of a class in a common data context.  In cryptocurrency, coloring is a concept that allows attaching metadata to transactions and by this leveraging the coins infrastructure for issuing and trading immutable digital assets that can represent real world value.  

Related to Burstcoin, the concept of colored coins refers to a method for tracking the origin of Burstcoins so that a certain set of coins can be set aside and conserved, allowing a party to acknowledge them in various ways. Such coins can be used to represent arbitrary digital tokens, such as stocks, bonds, smart property and so on. They can even represent real-world objects.

When a coin is “colored”, it can be traded on the Burstcoin network just as any other coin in the system. This allows Burstcoin to be exchanged for whatever object the colored coin represents.

This concept forms the basis for the Burstcoin Asset Exchange.

For an excellent white paper on the concept of colored coins, as written for the Bitcoin project, see https://bitcoil.co.il/BitcoinX.pdf

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