Earlier this week, CoinDesk’s Pete Rizzo reported on Gyft CEO Vinny Lingham‘s appearance at this year’s SXSW conference. Lingham was featured on a bitcoin-related panel with Boost VC Founder Adam Draper, Chain Founder Adam Ludwin, and Changetip Founder Nick Sullivan. It was during this panel that the Gyft CEO announced his companies intentions to “tokenize” gift cards and issue them as colored coins on top of the bitcoin blockchain.
[Read More: TREZOR Now Colored Coins Compatible]
Issuing gift cards as colored coins
Colored coins are a way to tokenize bitcoins for other uses. For example, you could say that a particular bitcoin represents $1000 in a vault somewhere, a deed to a house, or in this case a gift card. Once you tokenize a bitcoin, the value that it represents can then be transmitted across the world in the same instant and secure manner as a normal bitcoin. Lingham noted, “We can use this technology to make sure that consumer gift cards are protected, that counterparty risk is managed, and that it’s compliant.”
How will this work?
At this point in time, it’s unclear how Gyft will be implementing their colored coins-based solution. Coinprism and Chromawallet are two platforms that can be used to issue colored coins on top of the bitcoin blockchain right now, but it seems that Gyft may be creating their own solution. Lingham has let it be known that he’s filed patents related to this new technology, which is currently in the research and development phase.
In reality, any company who wanted to issue a gift card on top of the bitcoin blockchain right now could do it with one of the currently available colored coins wallets. It should be noted that Lingham is an advisor to Chromawallet, so it wouldn’t be surprising to see that particular colored coins project work closely with Gyft on this new concept; however, there is no indication that such a partnership has been created at this time.
A non-monetary use case for bitcoin
An interesting side note to this story is that colored coins are one of the main non-monetary functions of bitcoin that provide bitcoins with a bit of fundamental or “intrinsic value.” One must own some bitcoins if they wish to issue colored coins via the blockchain, and transaction fees still need to be paid to bitcoin miners every time those coins change hands. There are many economists and financial pundits who believe that bitcoins are nothing more than digits on a computer screen, but these sorts of use cases show that the technology can be used for more than just moving bitcoins from one address to another.
[Read More: Some Non-Monetary Functions of Bitcoin]
Having said that, it’s unclear if gift cards are the type of virtual good that need to be issued on a decentralized ledger. The distributed trust model offered by bitcoin is extremely valuable in certain situations, but that decentralization also comes at an added cost. On the other hand, outsourcing the security of the ledger is one of a few possibly overlooked advantages that Chromawallet’s Alex Mizrahi (also known as killerstorm) has pointed to in the past. It seems that Lingham believes there are certain advantages to issuing gift cards on top of the bitcoin blockchain, so perhaps we’ll have to wait and see what they come up with before jumping to any conclusions.
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