The three words "colored coins" have been the long-cherished wish of the cryptocurrency circle for more than ten years.

Colored coins were first proposed around 2012. At first, people just wanted to try to attach some information to Bitcoin so that it could be used to represent some virtual assets or real assets other than BTC.

That period was the beginning of the rise of altcoins. We saw a large number of new coins being discovered, but eventually most of them faded into history, or in a more unpleasant way, returned to zero.

Coloring is a scheme to mark Bitcoin. Without issuing any additional tokens, it is born around Bitcoin, thus providing more value carriers for different assets. From a certain perspective, colored coins are actually a manifestation of the "Crypto Community of Shared Destiny". If Bitcoin is popular, colored coins will also be popular.

But for more than a decade, colored coins have not really been released.

The biggest reason is the limitations of the Bitcoin mainnet. When people saw that Ethereum could quickly build an ecosystem and achieve a closed-loop business model, colored coins fell into disuse after repeatedly hitting a wall.

Since people first thought about how to mark homogeneous BTC as different colored Satoshis on Bitcoin, this "marking" attempt has gradually made people realize the huge potential of issuing assets on the blockchain. Including the future NFT, in fact, there is also a shadow of the idea of ​​colored coins.

It is not feasible to build an ecosystem with Bitcoin, and Ethereum itself has its own way of issuing coins, so colored coins faded into history, and attempts to put more assets on the chain began to emerge.

It seems that everything is developing in a positive direction, so do people no longer need the Bitcoin ecosystem?

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For more than a decade, the extreme conservatism of fundamentalists and core OGs has delayed the opportunity for Bitcoin to transform. To this day, many people still believe that the so-called "Bitcoin ecosystem" is nothing more than hype garbage that makes the Bitcoin network more congested.

But the environment has been changing quietly. The concentrated outbreak of the Bitcoin ecosystem has only happened in the past two years.

Bitcoin is updated every once in a while (network soft fork), and new features and extensions are introduced to Bitcoin through collective improvement proposals (BIPs). In recent years, the collective will of Bitcoin is slowly letting go of conservative prejudices. More and more proposals are moving towards openness, flexibility, and freedom.

The Taproot upgrade at the end of 21 made innovation possible within a certain range, so we witnessed the explosion of layer 1 protocols in 2022-2023. Are these protocols really here to make things difficult for Bitcoin? I think that if Bitcoin has the soil for their birth, then their emergence is justified.

People's attention is once again focused on Bitcoin. Can Bitcoin have an ecosystem? Should Bitcoin have an ecosystem? What kind of ecosystem will Bitcoin have and should it have? Amid doubts, the leading protocol Ordinals has already created a market value of billions of dollars.

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Now, Bitcoin has begun to have an ecosystem. The trend is there, the soil is there, and the time and place are right. In the second half of 2023, an anonymous developer (alias: Arthur) created the open source Atomicals protocol.

The protocol defines the ARC20 colored coin standard as follows:

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# Bitcoin's smallest unit of currency, "Satoshi", serves as the basis for value anchoring, giving rise to a homogeneous colored coin standard, in which each token is equivalent to 1 Satoshi (one billionth of a Bitcoin, or 0.00000001 BTC).

# The Atomicals protocol provides an efficient way to represent fungible token assets on the Bitcoin blockchain. With the ARC-20 fungible token standard, colored coin technology is applied to the Bitcoin ecosystem, where each token unit is represented by one satoshi, thus establishing a unit of measure for token ownership. Therefore, the value of each token unit is at least equivalent to 1 satoshi, providing a "digital gold content" to the value of the token. This ensures that by definition, the value of each token will not be less than 1 satoshi.

# ARC-20 uses Bitcoin's native satoshi unit to represent each token, allowing these tokens to be split and combined like regular Bitcoin. Anyone can mint ARC-20 tokens and transfer them to any Bitcoin address, suitable for wallets that support UTXO selection, such as Sparrow Wallet. Token issuance methods include direct issuance and decentralized issuance.

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Our attention returns to the dyed coins. Can this long-cherished wish from more than ten years ago be rekindled?

Someone asked: Since other chains outside do not need colored coins, why does Bitcoin need colored coins?

Bitcoin does not have any native way to issue coins. Unlike Ethereum and Solana, which allow you to create token contracts with one click, we do not have contracts or tokens. The entire Bitcoin ecosystem is still a wasteland under development. For an ecosystem to eventually become an ecosystem, it reflects the phenomenon that there must be a large number of targets that can carry funds.

It is obvious to the naked eye that various "RC-20" have blossomed in the past two years, and inscriptions and runes have also emerged. What kind of coin issuance method is most suitable for the Bitcoin ecosystem? People are exploring. Little do they know that the OGs more than a decade ago have already given an answer.

The starting point of Bitcoin has always been value storage, and the "token community of destiny" represented by colored coins is completely in line with the original intention of value storage. We do not create garbage on Bitcoin, but make every Bitcoin and every Satoshi uniquely valuable. The colored coin model ultimately enables Bitcoin.

Which satoshis are only worth 1 satoshi (itself)? Which satoshis are worth 100 satoshis? Which satoshis are worth 10,000 satoshis? This is how the currency circle within Bitcoin was established.

In this ecosystem of asset issuance, Bitcoin needs colored coins.

But rather than calling it a way of issuing coins, it is better to call "colored coins" a marking method. This "coloring" method provided by the Atomicals protocol gave birth to the ARC-20 standard.

The bigger vision is behind. “Coloring + decoloring” is the 0 and 1 of the Bitcoin application ecosystem. AVM will be the right path for the development of Bitcoin’s first-layer applications in the future. Bitcoin not only needs colored coins, but also the “coloring” method itself.

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This time, the concept of colored coins was fortunately truly realized.

In addition to ARC-20, there is no other protocol standard that fully defines the concept of colored coins. Fortunately, ARC-20 itself has been integrated by leading infrastructure service providers such as OKX, Binance, and Unisat, and has been widely adopted by the mainstream. In essence, "colored coins" does not refer to a specific protocol, but today, Atomicals is the only protocol that fully realizes the vision of colored coins and has been used and recognized on a certain scale. Therefore, I think ARC-20 will have the exclusive concept of "colored coins" for a long time in the future.

In the past few months, I have also heard of several protocols that have dabbled in the concept of “coloring”, but they are not working on “colored coins”. The only one that has truly implemented this concept is the Atomicals protocol.

Atomicals brings us colored coins, which bring the most native token gameplay to Bitcoin, and the coloring method opens the door to the application layer for Bitcoin. This is the first time that we can enter an era of flexible and practical Bitcoin, with all possibilities coming to us.

Many Bitcoin OGs have not yet paid attention to the already implemented colored coin gameplay. There are still many idealists around the world who are looking for things like Atomicals. I hope that we can bump into each other in the end.

#Atomicals #ARC20 #ATOMARC #QUARK #染色币