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Is it possible to limit the re-issuance of a Colored Coin?

Last Updated: May 25, 2014 07:02PM IST
Making sure a coin can never be re-issued
To be certain that your Colored Coin(s) will never be re-issued, you can delete your private key. This way, nobody (including yourself) will be able to re-issue Colored Coins from that address. This guarantees that nobody can steal your key and re-issue your Colored Coin(s).

Proving that a coin cannot be re-issued
It is not possible nor needed to be able to prove that a coin cannot be re-issued.

You can always re-issue new units of the same color, as long as you keep the private key needed for issuing.

The reason is that if you could not re-issue more units of the same color, nothing would prevent you from creating a new color and issuing new units, backed by the same contract. This would amount to re-issuing new units of the same color. This is why it is pointless to try to limit that from a protocol perspective. 

As an example, let's say you have gold coin backed each by an ounce of gold and you sell that for the price of an ounce of gold. Nothing prevents you from creating a gold coin B, also backed each by an ounce of gold of the same reserve. Those 2 coins would effectively represent the same asset, with the same counterparty risks so they are effectively the same, even if from the protocol point of view they would be different.

This would also give a false sense of security because people would think that coins cannot be re-issued when in fact this can be easily worked around.

In conclusion, you always have to trust that the issuer will redeem the coins for what they say they will redeem it for. The protocol is only done for accounting purposes and does not offer protection against the issuer. This is something that needs to be dealt in the real world (for example with a legally enforceable contract).
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