BUIP077: Enable representative tokens via OP_GROUP on Bitcoin Cash
Proposer: Andrew Stone (@thezerg)
Submitted on: 2017-11-19
Status: passed

Summary

This BUIP proposes that BU implement the OP_GROUP opcode as described
here:
https://medium.com/@g.andrew.stone/bitcoin-scripting-applications-representative-tokens-ece42de81285,
on the Bitcoin Cash blockchain. This basically adds “native” colored
coins to a blockchain. I believe that this additional feature will drive
use and therefore adoption of Bitcoin Cash. Today Bitcoin Cash is a
payment network. But with the inclusion of representative tokens, the
blockchain can be used for asset holding, and the network’s
functionality will be expanded from payment to exchange.

Specifically this BUIP authorizes us to:

1. Implement OP_GROUP, including all tests etc required to ensure the
   correctness and safety of the change.
2. Enable this opcode on the BU “nol” network.
3. Work with the Bitcoin Cash community to enable this opcode via hard
   fork on the Bitcoin Cash blockchain

What is OP_GROUP?

OP_GROUP is a single additional opcode to the Bitcoin scripting
language that effectively enables representative tokens (that is,
“colored coins”) on a blockchain. Unlike all current colored coin
proposals and implementations, in the OP_GROUP system the miners
validate the colored coins, as part of normal transaction validation.
This means that, like bitcoins, invalid colored coin transactions will
not appear on the blockchain (all other colored coin proposals can have
illegal transactions on the blockchain and therefore rely on every
client to validate every colored coin tx). Additionally, the OP_GROUP
proposal clearly marks every UTXO with a “color”. When you add these two
features together, the result is that: 1. A user can’t accidentally
spend colored coins as normal bitcoin 2. SPV wallets can handle coin
colorings with the same ease and security model as Bitcoins

This first version of OP_GROUP colored coins does not contain some of
the advanced features that some other colored coins support. But I
believe that it contains the key feature needed for colored coins –
enabling SPV wallets. This feature is missing from all other colored
coins proposals. Please read this link for details:
https://medium.com/@g.andrew.stone/bitcoin-scripting-applications-representative-tokens-ece42de81285

References

Chris Pacia just wrote a great article describing the system very
clearly:
https://www.yours.org/content/colored-coins-in-bitcoin-cash-b26804e05964/