Coloured Coins (officially colored coins) are known as a Bitcoin 2.0 implementation. It is a development of the Bitcoin protocol that allows anyone to assign an asset to a Bitcoin address. The person who assigns the asset to the Bitcoin address has the private key and is therefore responsible for defining the asset and controlling the number of units issued.
Bitcoin is in the process of revolutionising the way we use money. Along with a predictable supply, it provides features such as the ability to send any number of coins to another address without having to ask permission, and insofar as you protect your private keys, protection against theft or seizure. Inevitably, people started to consider how these characteristics could be beneficial to other assets, such as shares or bonds; others felt that there was a need for traditional currencies, backed by gold or other assets, but with the security and transfer abilities provided by the blockchain.
The computing power contributing to the blockchain is one of Bitcoin’s greatest strengths, in order to disrupt the network for even a small amount of time would cost hundreds of millions of pounds. Instead of trying to build a new blockchain for every crypto asset or currency, coloured coins are built on top of Bitcoin’s blockchain.
You send coloured coins to another person in the same way that you send bitcoins, the recipient simply needs to use a client that will recognise that the coin is coloured. Coinprism is our recommended client.