Open source banking — Announcing a new path for ColoredCoins
The latest Colored Coins protocol was released by Colu in the beginning of 2015, as an entire new industry started forming around the idea of issuance of digital assets on top of a blockchain. Our motivation at that time was to create a protocol that allows us to define more than just a basic encoding scheme into the Bitcoin blockchain — we set out to build a robust set of rules that allows us to extend the functionality of Bitcoin based assets.
Since the launch of the protocol, our focus shifted towards understanding the application side of this technology and to understand how our protocol fits in the ecosystem.
Two years later, it is clear that the blockchain space got more exciting and definitely more confusing with new technological concepts created each day and an unprecedented wave of support by corporations, banks, regulators and academia — all of this started from a technology intended to remove the middleman. But are we really heading into a world without intermediaries or they will just have a new role?
Blockchain technology evolution
From closely following this space it is not hard to notice that the crypto industry often mimics the real world with its own regulators (Bitcoin core, Ethereum), institutions (Miners, Exchanges) media (Reddit) and politics (the block size debate) It is clear that this world will also have its own version of banks and even though this technology changes the role of the middleman — we need them at each intersection of the new digital economy with our physical world and our traditional banking system. We also need them for connecting different blockchain eco-systems together and facilitating cross-blockchain transactions.
To provide such an infrastructure for blockchain banking, we have to create standardization around each layer of the software stack. As the ecosystem evolves, we are seeing a consolidation of ideas in the crypto-space, specifically around “layer 2” as evident in the recent proposals that use payment channels (Lightning, Lumino, Teechan, Raiden, Interledger etc…) to provide a scalable payment infrastructure on top of a blockchain — we are excited about the possibilities of this technological advancement and looking forward helping build this second layer.
Another realization that seems evident is that we will not hold the entire human knowledge on one ledger — we will see different ledgers for different use-cases and sovereign ledgers across different jurisdictions — The Bitcoin blockchain is still the biggest and most secure digital currency eco-system in the world and while ColoredCoins always was focused solely on the Bitcoin blockchain in its early days, it has to evolve to stay relevant.
All this led us to rebrand and refocus the Colored Coins project from a generic protocol to push meta-data to the Bitcoin blockchain, to a blockchain agnostic framework for digital currencies.
The project overhaul is going to include:
Open source banking — introducing the “Bankbox”
Colu is in the process of open sourcing it’s tools and release them as an easy-to-install module called the “Bankbox” that will allow better experience for digital currency issuers. Our goal is to increase adoption and address the needs of issuers around the world. Upon installation of the Bankbox, users will be able to provide asset verification credentials, fund a wallet, issue currencies, track the assets, manage distribution and using the API/SDK they can integrate to their internal systems and create a wallet for the currency.
The Bankbox allows a new banking model where the custodian handles consumer funds on an external, shared ledger while reducing custodial risk — requiring cryptographic signatures from customers to prevent misuse. Its operations are transparent, with the possibility of being regulated directly on the blockchain by providing cryptographic proofs to the regulator. The Bankbox will provide access to open-source tools that are battle-tested and could dramatically reduce banking IT costs.
The Bankbox will consist of: Full CC node, API, SDK, Explorer, Issuance tool and an open source wallet. In the future the Bankbox will allow issuers to launch payment hubs that will provide scalable payment infrastructure.
Our motivation to open source the code comes from the need to broaden the circle of developers working on Colored Coins and have more peer review and code contributions from the community (which is already quite large with 800~ developers on Slack and a network of ambassadors around the world)
But we feel that this is not enough, we aim to take a step back in the management of this community and invite early stakeholders to take decisions as an equal partner, this is the only way we can achieve our ambitious goals — by joining forces.
ColoredCoins blockchain group:
Bitt partnership in the Caribbean
Bitt will be the first deployment of the Bankbox in Barbados. Bitt has been very active in its participation as a ColoredCoins member and has contributed development resources as part of its mission to provide a local banking infrastructure for the entire caribbean area. The Bankbox will be utilized by Bitt to issue the “Barbadian dollar” using ColoredCoins technology and in partnership of the Barbados central bank.
- Focus on digital currencies — even though digital currencies describe a very wide range of use-cases it was still very important for us to zoom in on problems that are unique to digital money in all it’s forms and not stay in the realm of generic “digital assets”. We want to understand the needs of digital currency issuers and address their pains.
- Blockchain agnostic — The protocol and the code are running on top of Bitcoin but our goal is to understand how to integrate our tools with different blockchain from a deep understanding of the issuers needs. Our existing architecture could be easily adapted to UTXo based blockchains other than Bitcoin like Multichain and we have also joined as an associate developer community to the Hyperledger project — our goal is to promote interoperability with Hyperledger ecosystem.
- Scalability — Scalability is another long term effort we pursue. We launched a Lightning hub demo that supports Colored Coins and allows scalable off-chain Colored Coins transactions. We are working on adding native support for CC as part of the official Lightning protocol.
The Blockchain industry is rapidly growing and evolving — It allows new behaviours with money and new business models while building a totally new “plumbing” instead of the current financial infrastructure.
Join us in our efforts to affect this industry from a very early stage — our slack channel