Assets on the Bitcoin Blockchain With BitTorrent
The well funded startup Colu uses BitTorrent as the storage layer for assets stored on the Bitcoin Blockchain using the Colored Coin protocol.
Colu, a Tel Aviv-based Bitcoin startup, will soon launch an asset storage and transfer application. The app records any digital asset on the Bitcoin blockchain, using the Colored Coin protocol. Unlike other implementations of the protocol Colu uses the BitTorrent network as a data storage layer, which improves decentralization, redundancy, and eases size restraints.
During a seed round this January, the company raised $2.5 million from four different venture capital investors. Since then they’ve been busy hiring a team, settling into a big new office, and publishing their implementation of the protocol. The companies first app is in a private beta test phase already, with plans to publicly launch soon.
With the company website claiming that they will be “Creating, Storing and Managing Digital Assets On Top of the Bitcoin Blockchain,” Colu is offering digital asset management for all types of assets, both physical and digital property types.
The number and variation in uses for such a service truly strains the limits of imagination. As long as the authority over an asset agrees to allow digital tokens to represent ownership of those assets, there is no limit to what can be stored, tracked, and traded in real time.
If a city were to one day honor the legality of a cryptographically-protected, digitized copy of a home mortgage contract, then this important digital asset could be stored on the Bitcoin blockchain where it is immutably timestamped and effortlessly transferable. Once there, simple possession of the digital asset could indicate actual possession of the real-world asset.
Wills and trusts would fit perfectly into such an environment, and could be automatically executed, delivering the attached assets to a chosen recipient at the proper time without anyone lifting a finger.
Corporations could be chartered as digital assets, and their stocks issued as individual assets on the blockchain. Concert halls could issue digital event tickets with ease. Our very identities can be held this way, and of course our money and investments are already starting to be stored on the blockchain already.
Colu isn’t the first to introduce this concept, but they are the first team gearing up to offer an asset management product line to the public. The concept of digitized asset tokens on a distributed ledger has been continuously worked upon since the early days of bitcoin, using a concept widely known as coloring bitcoins.
“Bitcoin 2.0 and Colored Coins technology is just part of our behaviour evolution, COLU platform is the bridge between the technology and our everyday use that will enable a broader key and confirmation of who you are across all these things and experiences.”
— – Colu
Today there are already at least five teams implementing the Colored Coins protocol, of which Colu is the newest addition. Most famous among them is perhaps OpenAssets, which is being used for both NASDAQ’s private market securities and Overstock.com CEO Patrick Byrne’s T0.com securities exchange.
Colu appears to have attempted to create one unified protocol for issuing assets over the Bitcoin Blockchain, through consensus between all the existing players in the Colored Coins space. The company claims that proved to be difficult and time consuming, “so we decided to draft our own proposal.”
In June of this year, they officially split their protocol from the other groups by releasing the Colu protocol proposal on GitHub. The biggest difference being the use of BitTorrent for the storage layer.
Previous attempts at implementing Colored Coins have used some form of centralized database or a decentralized, secondary blockchain to store the bulk of the data on. If one of the teams wanted to store a mortgage deed on bitcoin’s blockchain they would use a tiny “OP_RETURN” information field, attached to each bitcoin transaction, which has a limit of only 40 bytes of information.
The OP_RETURN field would simply contain a pointer to a location on a centralized database, or secondary blockchain, which doesn’t have tiny information fields and can instead store large documents.
Using a second blockchain allows for some decentralization, and is arguably a better alternative to a single storage location such as a web server. The team behind Colu figured out an even better way to store their documents, using BitTorrent.
Instead of a pointer to another blockchain, the 40-byte information field in the bitcoin blockchain will hold a BitTorrent tracker file, which points to the storage location of a file in the BitTorrent network, arguably the most redundant network on Earth and already famous for holding huge files like HD movies.
“Until now, smart assets that were built on the Bitcoin Blockchain, used other Blockchains to hold the metadata or stored it in a centralized DB. Colored Coins new Rule Engine will automatically store the metadata in torrents, where they can be freely accessed and verified. There are important advantages to this approach: Decentralization, Robustness, (Even if our servers go down, the data is not lost) Ownership, (No one owns the data) and Provable immutability. (A SHA-256 hash of the metadata is (optionally) stored on the blockchain. This allows our code to verify that the data received from the torrent file is indeed the correct data.”
— – Colu
Issuing assets from your Colu app would instantly make your asset globally recognizable, and for the mean time will be free. While the company has yet to establish a revenue stream, the bitcoin transaction fees and relatively tiny amounts of bitcoins that represent an asset, amounts as small as 530 satoshis (0.00000530 BTC) will be supplied by the Colu team, at least in the near-term.
“The platform issues the asset for you and sends it to your Colu Bag (your public address). In the backend, Colu Engine funds and signs the transaction to save you the trouble of dealing with any Bitcoin related complexity.”
— – Colu
Security of your assets is an ongoing priority in the Bitcoin industry, and this is no different for Colu. At the moment the app requires users to backup the private key, without which control of any assets issued from that app would be lost forever.
Redundancy and user-friendliness are extremely important issues for them to perfect, and mainstream users are notoriously nervous about holding onto private keys by themselves. With the is mind, the team appears to be working on third party security services. “We plan to develop different secured and user friendly tools for those who do not want to hold the private key.” states the company.
Although Colu set out to simplify blockchain complexity, and claims that users will not need to hold bitcoin nor have any knowledge of how Bitcoin works at all, educating users about how the blockchain and private keys work may be paramount to their success. If achieved, Colu could very well be the service that shows the greater world, not just the investing community, how putting assets on the blockchain can benefit us in a variety of different ways.
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