Extended protocols on top of Bitcoin

Several protocols, as discussed in the following sections, have been proposed and implemented on top of Bitcoin to enhance and extend the Bitcoin protocol, as well as to be used for various other purposes instead of just as a virtual currency.

Colored coins

Colored coins are a set of methods that have been developed to represent digital assets on the Bitcoin blockchain. Coloring a bitcoin refers colloquially to updating it with some metadata representing a digital asset (smart property). The coin still works and operates as a Bitcoin, but additionally carries some metadata that represents some assets. This can be some information related to the asset, some calculations related to transactions, or any arbitrary data. This mechanism allows issuing and tracking specific bitcoins. Metadata can be recorded using the Bitcoin's OP_RETURN opcode or optionally in multi-signature addresses. The metadata can also be encrypted if required...