 Is a colored coin a meta coin? So, Albert, the term metacoin, I think, has only been used by me. I coined the term, if you like, back in 2014 when writing Mastering Bitcoin 1st Edition. I wanted to differentiate between coins that have their own blockchain, coins that were called altcoins at the time, and coins that use metadata on top of another blockchain. Nowadays, that term I don't think is that useful, because that distinction is a bit blurred. So, coins that use metadata on top of an existing blockchain, colored coins are, according to my definition, meta coins. They do not have their own blockchain. They use metadata in order to exist on top of another blockchain, in the particular case of colored coins, that usually refers to the Bitcoin blockchain. But nowadays, we have all of these tokens. Tokens could in some ways be considered meta coins, because they are metadata on top of Ethereum. But then again, not really metadata, they are full smart contracts. That definition is a bit blurry nowadays. Let's go to the second question. Albert asks, how would the colored coin appear on a blockchain? Can a transaction involved a colored coin be distinguished from an ordinary transaction? Yes, Albert, it can. On the blockchain, what you will see is, within the transaction that refers to a colored coin, there will be some additional data in the form of an up-return code. What the up-return code does is, it is a non-spendable output that contains up to 80 bytes of data. These 80 bytes usually have some kind of prefix that identifies which protocol they are using. For example, if a certain type of colored coin is implemented from KOLU, or an open asset implementation of colored coins, then the first two characters will actually identify it as such. If the transaction is part of some kind of secondary layer, like counterparty or omni, again, the up-return will contain a prefix that identifies it as an omni-metadata or as counterparty-metadata. As a result, you can identify colored coins and transactions happening on secondary layers, like counterparty and omni, on the blockchain. Vikas asks a similar question. In regards to colored coins, how is a Genesis transaction created? Is the Genesis transaction part of the Genesis block? No, it's not, Vikas. A Genesis transaction is a transaction on Bitcoin that has within it an up-return. That up-return identifies that a new colored coin has been created, and the up-return itself would have some kind of prefix identifying which colored coin protocol is being used. Would color the specific coins in that transaction with the new metadata for this new form of colored coin that has just been created? The fact that it's called a Genesis transaction is a bit confusing. I agree with you, because we use the term Genesis to mean something else in Bitcoin. It's the Genesis of that colored coin. Again, Genesis is simply the Greek word for birth, so it's the transaction that gives birth to that colored coin. Sudhakar asks, what's the difference between coins and tokens? Can this be defined in layman terms? What a great question, Sudhakar. I've been wanting to talk about this for a while, because people use these terms interchangeably. I think a good definition is this, a coin has its own blockchain. A token does not. A token usually is implemented on top of a coin. For example, the various tokens that are used in counterparty, omni, and colored coins are all tokens. They work on top of Bitcoin, which is a coin with its own blockchain. All of the ERC-20 tokens and other standardized tokens, ERC-721 tokens, etc., that exist in Ethereum, those are all tokens. They don't have their own blockchain, they operate on top of the Ethereum blockchain. People use these terms interchangeably, and it's very confusing for most new users. I think one way to remove the ambiguity a bit, and it's not a perfect rule, and it will probably get violated, is to call things that have their own blockchain coins, and to call things that do not have their own blockchain, but operate on top of another blockchain as a smart contract or secondary layer tokens. Issa asks, can anyone create their own coins using Ethereum? Yes, you can create your own, and those are called tokens. In last week's class, we talked about the difference between coins and tokens. While this isn't a broadly accepted definition, I use it for convenience. Coins are things that have their own blockchain. Tokens are things or abstractions that run on top of another blockchain. ERC-20 tokens or Ethereum tokens are abstractions that run on top of the Ethereum system, which has its own coin called Ether, which runs on its own blockchain, the Ethereum blockchain. Similarly, you could have Bitcoin with its own coin, which is Bitcoin, which runs on its own blockchain, Bitcoin. But it also has the ability to run tokens, such as those built using counterparty or omni. Those are not coins, they don't have their own blockchain. Issa asks a follow-up question, how was Ripple and Litecoin created? Both Ripple and Litecoin have their own blockchain, so they are independent coins. They are not tokens running on top of another blockchain, and they have a very different path. Litecoin is based primarily on Bitcoin's codebase. Litecoin is a slight modification of Bitcoin's codebase, and has been following the development of Bitcoin very closely. It's meant to be a lighter, faster version of Bitcoin, exploring different trade-offs between scalability, security, and centralization. But it still maintains more than 99% the same codebase as Bitcoin, and keeps upgrading accordingly. Ripple, on the other hand, is a completely separate codebase. It has nothing to do with the code in Bitcoin. It has a different model for implementing its network, a different model for validation of transactions. It uses a federated model instead of a blockchain, and it has different properties for security, decentralization, and scalability. Richard is asking a slightly cheeky question, do you think building smart contract functionality on Bitcoin can make Vitalik blush? The full question is, the ERC20 standard for creating tokens has been hugely successful, driving many individuals and businesses to Ethereum. Are you aware of any smart contract protocols allowing the creation of tokens that can be secured to Bitcoin's blockchain? More precisely, now that the Lightning network layer is taking roots, could this be built upon to offer decentralized, permissionless token issuance, combining Bitcoin's ultra-high security with Lightning's ultra-low transactions, smart contract execution costs? Richard, first of all, I don't think Vitalik is going to blush if Bitcoin does smart contracts. As I've said many times in the past, I don't think that Ethereum and Bitcoin are competing directly, nor do I think that they can compete directly, because the flexibility that exists in Ethereum makes it less suitable for doing the robust reserve currency functions of Bitcoin, and the robust reserve currency functions of Bitcoin make it less suitable for doing the flexible smart contracts of Ethereum. You can't get both. Now, I know you're going to hear a lot of people tell you, you can absolutely get both. Bitcoin maximalists will tell you, Bitcoin can do everything that Ethereum can do only better, Ethereum maximalists will tell you Ethereum can do everything Bitcoin can do, in fact, every other chain can do only better. I don't think that's the case. I think there are, in practice, engineering trade-offs that have to be made where you can't get everything. When I used to be a consultant, I used to tell my clients, you can get best, you can get fast, or you can get cheap. You pick two of those. So, of the best, fast, and cheap, you only get to pick two. It's either going to be cheap and fast, and it's not going to be my best work. It's going to be best and fast, and it's not going to be cheap, or it's going to be cheap and best, and it's going to take a long time to do. Those are the options. In computer science and in other terms, we call that a trilemma. It's like a dilemma only with three, a trilemma in which you can only pick two. Blockchains have a lot of trilemmas in them, and these trilemmas are optimizations. Security, scalability, privacy, pick two. Flexibility for smart contracts, immutability of the chain, robust finality on the consensus algorithm. Pick two. Generally, these become the trilemmas that we have to optimize for. There are companies trying to reconcile some of these and optimize for different points in that trilemma. You can fudge a bit and move a bit in more direction, move a bit in the other direction, but you're not really removing the trade-off. In fact, I actually like systems that explicitly take a position on this trilemma and don't try to do everything. The systems that try to do everything suck at everything. The systems that have a specific philosophy. Bitcoin isn't trying to do very flexible, very complicated smart contracts because that comes at a security cost. Ethereum isn't trying to work conservatively and slowly because moving fast and breaking things, and innovating as quickly as possible to do flexible smart contracts, is absolutely the sweet spot for that blockchain. We can go into analysis of other blockchains and look at the various optimizations they do. We used to have ICO-capable ERC token-like tokenization systems in Bitcoin before Ethereum came along. Bitcoin did this. It did it with COUNTERPARTY, which is a second-layer protocol using the opera-turn data parameter in the Bitcoin script. Two-track metadata, colored coins. We had and have still the Omni protocol layer. COUNTERPARTY and Omni still exist on Bitcoin. You can still do ICOs, tokens, coins, and all of that stuff. Of course, there's RSK, which is trying to build a side-chain, or drive-chain, in this particular case, that works in parallel with Bitcoin, where you have smart contracts that are peg-to-the-Bitcoin currency and use part of the Bitcoin security model. Again, these are different optimizations. The market is already telling us that they would rather take the flexibility of Ethereum. Quite honestly, that's a bit of a double-edged sword, because yes, you get all of the ICOs, but you also get all of the scam ICOs. Do we really want that to come back to Bitcoin? If you look at the history in 2012, ICOs and new coins were being done with alt-chains, so people built entire blockchains by forking the Bitcoin code. That's what you saw in the early coins. Some of them made sense, some of them didn't, most of them didn't. Then we had the second layer of stuff. In 2013 and 2014, we had COUNTERPARTY and Omni, and we saw a lot of initial coin offerings on those. ICOs were not invented by Ethereum. Bitcoin was doing them for two years before Ethereum came on the scene. Finally, Ethereum made it so easy to do that any programmer with basic JavaScript experience can code an insecure token and make a mess. That's what happened. I don't know that we want that in Bitcoin, because that dilutes the value proposition of Bitcoin. It's an interesting proposition. What Rootstock is doing is an interesting proposition, but we'll see how that plays out.