Great+Chain+of+Numbers+A+Guide+to+Smart+Contracts,+Smart+Property+and+Trustless+Asset+Management+-+Tim+Swanson

Chapter 3: Next Generation Platforms
As innovative and groundbreaking as Bitcoin has been, it has several known technical limitations. 102
Simultaneously, the current development team is hard at work on priorities revolving around improving
the security of the protocol from vulnerabilities and exploits. 103 This is not a criticism of their activities
and actions, especially in light of the transaction malleability issue that caused frenetic activity within
the ecosystem during the middle of February. 104 Other developers in the community have tried to
assume the mantle of responsibility for improving the functionality and capabilities of this space. Some
projects involve fusing exoskeleton systems built around the Bitcoin protocol; others create their own
independent ledgers; still others have even created bridges between Bitcoin and other ledgers.
Below, I introduce eight projects that are currently developing a mechanism to design and transport
smart contracts or smart contract functionality. 105 For each, I attempted to interview the main
developers.
Colored Coins
As noted above, one way to utilize a crypto blockchain to verify wares is through a process being
developed called Colored Coins. 106 In a nutshell, this endeavor allows users to “color” a token to
represent a specific asset such as a car, home, boat, commodity, a share, a bond – virtually any type of
asset (e.g., 0.5 BTC colored green to represent your home). These tokens can then be exchanged, just
like bitcoin tokens, by anyone anywhere. This enables a decentralized, trustless form of asset
management that uses a blockchain as both a ledger and transportation mechanism.
Alex Mizrahi, who is leading the development of the Chroma Wallet used by the Colored Coins project
says that “it is going to be very easy for the asset management industry as a whole to use Colored
Coins. 107 For example, some of the first places we are going to have adoption will likely be real-estate
and portfolio management. In fact, for any type of asset management it’s going to be simple to issue his
own color that represents his goods. A portfolio manager can issue one color that represents a portfolio
of stocks backed by the real holding and sell it globally. If he is savvy and his products are good, his
colors are going to have demand. So transferring ownership is very easy, quick and safe — just like
bitcoins. In the real estate industry someone can issue their apartments using colored coins and have
them float on the blockchain, or manage time-sharing based on color.” 108
Meni Rosefeld, another member of the development team, described several of the advantages of using
a secondary attribute (color) within the asset management industry. “The greatest advantage is the
removal of barriers of entry. Currently, new businesses wishing to raise capital use cumbersome and
inefficient private deals; and those aspiring to be listed in order to allow for the market to valuate them
with an efficient mechanism, can only do so with a great expenditure. With colored coins, anyone can
easily raise funds in exchange for equity, removing barriers of entry, encouraging innovation and
allowing society as a whole to better allocate its resources between ventures.”
One area of confusion within the Bitcoin community is the misplaced understanding – that centralized
servers are needed to issue and track a secondary attribute (the “color”). According to Rosefeld, this is
incorrect. “No centralized servers are needed for tracking – this is done in the decentralized network of
the host currency (such as Bitcoin). There does need to be an entity issuing each particular colored coin
– however, an entity raising funds for a generic purpose is not usually in the business of running an
exchange. Without colored coins, they would have to resort to a large 3rd party exchange with all the
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