Quote from: Peter R on May 15, 2014, 08:27:19 PM

Quote from: jordan.dev on May 15, 2014, 05:38:08 PM

Now in example, say there were 5 "Colored Coin" exchanges and I had an "in-demand" asset, and controlled the private key to said asset. I could go around and issue myself more supply to sell on these exchanges, and the buyers would be none-the-wiser that they were just buying from me.

I mean the concept is great if you trust the exchange to control the private key (or a 3rd party). But you have to trust a 3rd party! Unless there is a mechanism that limits the future issuance "dilution" if you will of the original asset.

Maybe I'm just misunderstanding? Thoughts?

You are completely correct that the issuer can just keep re-issuing more and more colored coins. It's seems like a weird concept if you imagine doing it yourself, but this is very similar to how companies issue shares or bonds today. Corporation A can issue as many shares as it likes. The money that it raises legally belongs to the company, but of course the president could probably find a way to use that money to pay himself a huge salary or an accountant could embezzle it.

But the free-market will self regulate: if BTCorp keeps issuing new bonds and selling them on an exchange, it will drive its own bond price down and thus its effective interest rate up. So BTCorp wouldn't do this because it just increases its funding costs (unless it is planning to sell as many bonds as possible and then default, but that would fraud and fraud is still a crime even if it's done with bitcoins.)

I really like colored coins because it makes the fact that they are promises obvious: bitcoins themselves have no counterparty risk, while colored coins are only as good as the promise of the issuer.

Agree with both people. I just wasn't positive if there wasn't some mechanism by which "holders" of these outputs would notified / capable of stopping additional output generation.