You can't. But it doesn't matter which transaction the .5BTC is a child of. You have to see colored coins as a tag, not as an actual coin. So: +-- 1BTC+C1

You can't. But it doesn't matter which transaction the .5BTC is a child of. You have to see colored coins as a tag, not as an actual coin. So: +-- 1BTC+C1 (from DEF) -> +-----+ +-----+ | ABC | +-- 1BTC+C1 --> + XYZ + +-- 1BTC (from GHI) -> +-----+ +-----+ The DEF->ABC transaction is tagged with C1. And the ABC->XYZ transaction is also tagged with C1. XYZ should look at ABC's history and see if he ever had an incoming transaction with C1, and then check DEF and see if he had an incoming transaction with C1, etc.. There's probably a fancy scheme to make this checking of colored coins in the blockchain easier, I'm not familiar enough with colored coins to know for sure.