In the past, we often likened BTC and colored coins to gold and gold jewelry. Many people would interpret this analogy as emphasizing the value preservation function of ARC20, while overlooking the ceiling of additional value.
After a discussion with friends today, we found another perspective to compare it to a traditional online game – a limited edition “equipment” that can be worn, removed, and upgraded, which may highlight the premium principle of colored coins over white coins.
The ordinary coin, which we call the white coin, is the smallest unit of Bitcoin that has not undergone any coloring (0.00000001 BTC).
The “coloring” process involves dressing a white coin in rare, limited edition “equipment.” (In traditional online games, similar analogies could be skins, costumes, emblems, and so on).
Some liken colored coins to a type of rare coin, but in reality, the logic behind the two is different. On one hand, it’s about the source – innate and acquired differences; on the other hand, it’s about the nature of “wearing equipment” – once an equipment is worn on a coin, its status is “soul-bound” and cannot be directly removed but can be destroyed by “decoloring” it. It can also be exchanged with other coins to be worn, and a coin can wear multiple pieces of equipment at the same time (although this is more complex and not attempted at present).
Ultimately, the colored coins we hold are those that have been attached to rare and distinctive limited edition “high-level coins” with various characteristics of equipment.
These “equipment” have several characteristics:
1. Acquisition cost: Initially, acquiring this equipment requires a cost – creating the equipment and having it worn on coins is the minting (coloring) process.
2. One coin, one coin: Equipment must be worn on coins to realize their value. One coin naturally corresponds to one coin. Even if the equipment is of poor quality, the coin still holds value. If the equipment is good, the combination of “equipment + coin” naturally becomes more valuable.
3. Series differentiation: Equipment within the same series, for example, equipment named Quark, are homogenized (FT); whereas different FTs, such as Atom and Quark, belong to different series of equipment and have completely different values.
4. Limited total quantity: Once issued, each series of equipment has a limited total quantity. For example, Atom equipment has 21 million pieces, and Quark equipment has 10 billion pieces. Today, one piece of Atom equipment with a coin is worth 4.3u, while one piece of Quark equipment with a coin is worth 0.0023u.
5. Additional value: In the past, we likened colored coins to gold jewelry, emphasizing their value preservation. However, from the perspective of “coin + equipment,” coins are used for value preservation, while the value of equipment has no ceiling and is determined by narratives, applications, and other factors that decide their endless upgrades and advancements since their creation.
When deploying a new ARC20 token, for example, named xxx, with 21,000 copies, each with 1,000 coins, you are essentially acting as a limited equipment factory, producing 21 million legendary pieces of equipment. The minting process that others go through is the process of dressing these pieces of equipment on white coins. A successful minting means dressing a piece of equipment with the appearance of “xxx” for one’s 1,000 white coins.
The additional value of this “xxx” equipment is defined by the public. It can be a pure meme costume or come with various narratives. It can be upgraded with the support of the community, allowing it to evolve, advance, and improve gradually.
When we add interesting narratives to the “xxx” equipment, for example, saying it’s approved by the Thunder God, then everyone’s “xxx” equipment will receive an internal value boost, driving consensus approval. When we empower the “xxx” equipment, develop applications, all “xxx” equipment will receive external functional enhancements, increasing their practical value.
Since equipment is scarce, it can naturally be speculated upon. Looking at it from the perspective of “fashion” and “skins,” there’s aesthetic value (narratives), making it the most direct value perspective as a luxury item and rare craft. Of course, from the perspective of “defense,” “durability,” there are attribute value bonuses such as empowerment, applications, and rights (without limits to points).
By understanding “coloring” and “coins” separately, it may offer an interesting perspective on colored coins.
When I shared this idea with a friend, he agreed with the concept but raised a question – how do we “add points” to equipment?
I said, this is the right approach, adding points to equipment is where its additional value shines. It emphasizes that colored coins not only preserve value but also have the potential to appreciate.
When we incorporate the goal of “upgrading equipment,” we can also involve the community in a new role. We say that a token community must persevere, must “Build.” In fact, this act of “Building” is all about adding points to equipment.
Those who write articles, write one after another, gathering grand narratives (increasing durability); those who output MEME culture with visual images, cultural genes that can be spread throughout the community, gather enduring consensus (enhancing aesthetics, charm); empowering applications, based on token functional development, provide more targeted practical value (enhancing special effects, passive skills); cross-project and cross-track development collaborations, cooperation benefits between multiple projects, allow people to earn unexpected returns on tokens (increasing drop bonuses, experience bonuses); those with sufficient funds, market-making, supporting markets, are the most direct market drivers (increasing offense, defense); after years of spreading the word, building up for a possible marketing breakthrough in advance, every step of development holds significance (increasing critical hit rate)…
In fact, Building can be done anywhere. These activities can be carried out with any token. But only when we understand “coloring” as “wearing equipment,” does Building take on a more intriguing interpretation.
Looking at it this way, forging equipment, hoarding equipment, refining equipment to make your “coin” legion stronger, might just be a “fun” path to take.