Am I missing something? Is this something that one would expect to be covered in the legal agreements that "link" a real-world asset to a particular set of colored coins? Something else?
youre not missing anything, Color Coins[1] are going to be a nightmare in practice. They seriously distort the economics of mining.
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It's these very problems, and a few other revelations that led to my development of Confidence Chains.
Confidence Chains has none of these problems. It doesnt use mining at all.
[1] and presumably Mastercoins
Thanks for the comments - I'll take a deeper look at confidence chains. When I first read about them, I must admit I was unconvinced. In particular, your paper (link below so you know which one I'm talking about) lacked any analysis of the potential attacks and didn't give me much insight into how the confidence values for nodes would be set (and evolve) over time. e.g. what happens if different nodes assign different values to the confidence they have in other nodes? Surely everybody would have a different view as to which the most confident chain was?
No doubt these issues have already been discussed (probably on here somewhere) but my sense is that if you're going to throw out the proof of work system (and I see why it could be attractive for some scenarios), there probably needs to be a reasonably rigorous analysis of how the system could be gamed, etc.
Very interesting concept, in any case.
https://docs.google.com/viewer?a=v&pid=forums&srcid=MDg1Nzc2MjYxNDE2NDcyMjk2NDcBMDQ4MDMyNzQyMDY2MjExMDkyNzEBNU81RURra1djcHdKATQBAXYy