Colored Coins
Colored Coins is an open-source protocol built on the Bitcoin 2.0 that allows users to represent and manipulate immutable digital resources on top of Bitcoin transactions. They are a class of methods for representing and maintaining real-world assets on the Bitcoin blockchain, which may be used to establish asset ownership. Colored coins are bitcoins with a mark on them that specifies what they may be used for. Colored coins are also considered the initial step toward NFTs built on top of the Bitcoin network. Although bitcoins are fungible, they can be marked to be distinguished from other bitcoins. These marked coins have specific features that correspond to physical assets like vehicles and stocks, and owners may use them to establish their ownership of physical assets. Colored coins aim to lower transaction costs and complexity so that an asset's owner may transfer ownership as quickly as a Bitcoin transaction. Colored coins are commonly referred to as metacoins because this imaginative coloring is the addition of metadata. This enables a portion of a digital representation of a physical item to be encoded into a Bitcoin address. The value of the colored coins is independent of the current prices of the bitcoin; instead, it is determined by the value of the underlying actual asset/service and the issuer's desire and capacity to redeem the colored coins in return for the equivalent actual asset or service. (Wikipedia).
