While many people in the Bitcoin ecosystem are excited about Ryan Charles ’s new job as a cryptocurrency engineer at Reddit, this news does not necessarily mean that Reddit is going to release some kind of colored coin on top of the Bitcoin blockchain. Charles has even mentioned his own admiration for the colored coins concept on Twitter, but it’s possible that a centralized token that represents equity in Reddit could be the practical option.
Centralized Reddit Coin Could Be Better Solution
One of the main reasons for issuing a colored coin over a centrally-controlled asset is decentralization. Having said that, decentralization does not really matter when it comes to tokens backed by centrally-controlled assets. There is not much of a need for censorship-resistance when issuing shares in a legal, regulated company.
@kyletorpey @killerstorm @BTCTalks Once you make trust part of the underlying value, there’s no point in decentralization
— Jeremy Ross (@jebus911) October 3, 2014
US Government Won’t Allow Decentralized Reddit Coin
The real problem associated with issuing a colored coin backed by a real world asset on top of Bitcoin is that the US Government won’t let it fly. Reddit would be a centralized point of attack, and it’s likely that any decentralized token issued by a centralized entity would eventually be shutdown due to KYC and AML regulations. Although Alex Mizrahi pointed out that Reddit could require their own signature on every RedditCoin transaction, that kind of defeats the purpose of decentralizing the token in the first place.
Reddit could always move their headquarters to another, crypto-friendly country, but we’ll have to see how far they’re willing to go for asset decentralization. As a side note, it is rumored that Patrick M. Byrne of Overstock will be sharing his experiences related to the issuance of a cryptostock at the upcoming Inside Bitcoins Vegas Conference.
Please share your thoughts on this topic below. Perhaps the viability of a Reddit or Overstock colored coin will become clear after Patrick M. Byrne shares his ideas in the coming days.
Note: Thanks to Jeremy Ross and BTCTalks for the recent discussions on this topic via Twitter.
You can follow @kyletorpey on Twitter.
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