Can someone please explain to me what the difference is between sidechains, colored coins, factom, ethereum, and mastercoin aka Omni and Synero?

TL;DR -> Mentioned technologies would need to create value through interaction and use of bitcoin in order to succeed AND would need to successfully collect a substantial portion of the cryptocurrency community in the process.

This all started as a question I was about to ask you guys over at /r/cryptocurrency subreddit, but after browsing the data for myself this is what I’ve uncovered:

Mastercoin was the OG. They came in, wanting to do an ‘On-Blockchain’ protocol that would facilitate Smart Property Contracts and also pegged exchange to stuff like the USD and other externally reportable api events. This was back in June 2013. Now fastf orward I see they’ve rebranded into something new that seems to namedrop other technologies left and right and also seems to be PUSHING a crowd sale for Synero – WTH is that Shit?

wtfisthis

So I look that up – Its a Social network attention based idea (the whitepaper is barely 1 month old)- It appears to combine existing networks Gems and Tsu into another sort of super-network.  You are compensated Amps for your interaction and participation within the network.  However there exists yet another crowd sale for (who knows?) the presale of Amps to use within the network.  Its like saying, Hey checkout my new technology that pays you, by the way you need to prepay it in order to have tokens to use to begin with.  According to the bottom of page 10 of this whitepaper by synero it appears that YOU the user, must pay to post, and that prepayment of Amps is then repaid to participants who use the system. That furthermore, there is an REO (aka reputation) style system in play and that individuals with higher ranking reputation get a larger portion of the rewards available.  By proxy, as a content creator, you are required to pay your viewers to view your content…HOW DOES THAT MAKE ANY SENSE?  Do you pay to use facebook?  I see that it basically remains there on posting history if you a) get a lot of interaction/attention b) pay for it to be repromoted.  Okay, got it, moving on.

Ethereum – Okay this one I know much more about to not have to leave my page and research.  A guy named Vitalik Buterin hypothesized and created a concept of a distributed ledger that runs on Ether – Called Wei or Gas, Ether was the currency used to create Contracts on the Ethereum network and was proposed in December/January 2013.  From there they created a crowdsale much later which generated operating seed capital.  Notable Project running on Ethereum Testnet is DDOUG.  So far there has been no major news of when Ethereum Main Net will be up and running.

Factom – This one is about having a ledger ‘audit trail’ application built on top of blockchain technology to store larger data sets through compressed secured hash-tables.  (I think).  From their FAQ page, this sums up sort of nicely what they intend to do with the technology: Is Factom primarily about proof of publication, proof of process, or proof of audit? Spoiler: They said all three.  I don’t see where the monetary consensus comes in to use this, other than that you must buy tokens in order to utilize it – why not just fork their source code to build your own version without using their tokens though?  I’m just confused as to what the point was of raising funds unless they were planning to use those funds for themselves to continue development efforts.  However, from raw face value, I could definitely see the benefit of using Factom if the system itself can be transparent on some parts and also if it were truly implemented by local and national governments and business entities to establish some levels of regulatory transparency – THAT would be ideal imho.

SideChains – Mad props to /u/futilerebel for his main response gave a very detailed explanation that I’m using as a foundation for my own understanding of explanation.  Sidechains allow you to transfer bitcoins onto alternative chains to do some fancy or special features like perhaps holding a storage of contract or pegged against another asset.  Another user dubbed Sidechains as: Alt-chains without Alt-Coins which i think was an eloquent comparison.

And finally, Colored Coins is an ‘open assets protocol’.  That is, it is a mechanism by which specific wallets and wallet groups and label certain denominations of Bitcoin as ‘colored’ or denominated for a special asset purpose or reason, similar to above.

Now that we have discussed the differences between the technology lets get down to the nitty gritty:  Why do you, as a technology developer want me to invest my bitcoin into your technology?  With the exception of SideChains and Colored Coins (those are proposals for standards and frameworks with many different proposed solutions in and of themselves), all technologies proposed here had a crowd sale to generate seed capital (in the form of tokens traded to you for your Bitcoin).  Only in the case that the investment is a wild success, does it make sense to have held the alternative asset token these technologies are presenting to us – doesn’t it?  Not really…because you’re simply speculating at that point.  Why does holding the token become a requirement for the token to hold value?  By proxy that argument should also be questioned towards bitcoin too – my response to this is that at least in bitcoin, the value lies in the network of participants willing to spend and accept it.  This same barrier by lack of network participants is precisely why the projects above seem to repeat themselves again and again.  Bitcoin has been successful because it works as a great medium to exchange value internationally with minimal fees and requires no banking institution.  It can also be integrated with other technology (as development occurs).

 

Post Author: Frankenmint

From the pristine land of the internetz, the Frankenment was bred from machine. While looking to embrace the new world Linux regime he is truly a windows bred. I've come from the darkness to the light to share with you other internetz fol-ken to share the message of virtual money. Through our actions, we can make the virtual world yet again beyond the decree of the internet, with the decree of internetz money! Bitcoin, the Supercurrency, the official tender of the internetz that will be accepted by all countries and all fol-ken Alike!
  • paulsnx2

    Paul Snow of Factom here. Factom has a token to 1) prevent spam, 2) use the protocol to incentivise servers recording the data, 3) to distribute the right to directly access, or sell access to, the Factom Protocol. Factom is secured by the Bitcoin Blockchain, and is designed to be able to scale to very large transaction volumes, without bloating Bitcoin.

    Further it doesn’t bloat the user either (they have their own “Factom Chains” and each is independent from other chains).

    Yes Factom’s first customers are likely countries, particularly non-western, who are locked out of banking, financial, and business services due to unreliable if not corrupt business processes. Factom can scale to create immutable audits of these business processes, all secured with Bitcoin’s blockchain, and without requiring complete paradigm changes in software architectures.

    I hope this helps! Thanks for asking great questions!

    • Wow I’m just noticing this now, thanks for dropping by! Could you kindly elaborate on phrase 2? When I read ‘use the protocol’ I think of proof of stake or something similar where a payout is generated, is your method similar? Also, I recall reading that factom will use hashtables to store, modify, and update data. By having separate Factom Chains, will users be able to create their own Factom nodes and be paid to host data, OR are you saying that there will be different entities acting as trusted custodians (like Second Market is acting as a trusted issuer of GBTC shares – does Factom establish nodes of trust or does it allow users to bootstrap their own nodes to participate and earn?)

      • paulsnx2

        Sorry for the slow reply.

        Factom has a two step process, where Factoids (Factom’s token) are converted to Entry Credits and assigned to a different address. This address can then use the Entry Credits simply by signing transactions and submitting them to Factom.

        It is the Entry Credits that are used to vote in the system. So it is very much a proof of use rather than proof of stake.

        Users create Factom Chains to hold their data. This data is held by Factom nodes which may be paid to hold it, or perhaps these nodes will simply use the data.

        Factom doesn’t establish nodes of trust or act as trusted custodians.

        Factom does allow users to bootstrap their own nodes and participate. Exactly how that will work is not exactly clear (outside of becoming one of the Federated Servers or Audit servers.).

      • paulsnx2

        Wow. Time has flown, and I had not noticed your questions.

        Factom is now live (since September) and we are continuing to build out the protocol.

        Factom uses a two token system, where the first token type (factoids) is paid to the servers and is tradable. The second token type (Entry Credits) is created by converting factoids. Entry Credits are not tradable, and are consumed by placing data into Factom.

        This two step process allows us to separate the tradable token completely from the use of the protocol to record entries into Factom. It also makes the protocol less susceptible to censorship.

        Finally, Factom allows entities to establish a digital identity, and gather support for their server to run the protocol from those using the protocol (i.e. have purchased Entry Credits). So this is much more like “Proof of use” than “Proof of stake”. Servers with the most support actually run the protocol.

        I hope this helps.

        • Honestly, I’m more confused now with the last paragraph. So then I issue entry credits which allow encrypted data warehousing on my server that is highly compressed via the form of hashtables?

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