Colored Coins is a protocol to create digital assets on top of Bitcoin Blockchain utilising its functionalities beyond currency. Colored coins protocol uses two types of Bitcoin OP_CODES to store asset manipulation instructions on top of the Bitcoin blockchain - GitHub . Evolution of Colored Coins protocol is Open Assets protocol, so to follow this topic it would probably more useful to follow.
- OP_RETURN outputs
- Multisignature addresses (optional)
How Colored Coins are made
In order to issue a new color, one must release the coins of that color by creating a genesis transaction. A colored coin genesis transaction has specific rules that its inputs and outputs must follow.