The following exerpt is taken directly from the article: The obscure history of colored pencils and their existence today by Rebecca Adams.
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Colored pencils "are much like a normal pencil, with a wooden casing and core. The main difference, quite obviously, is that they have a core made of colored pigment. This pigment is made using wax, additives and binding agents. You can even get colored pencils that are oil based, water-soluble or come in mechanical pencil form.
Wax based colored pencils are great for layering, though wax bloom, or a white haze due to wax buildup can be an issue. Non wax-based pencils, like oil based ones, may require more pressure though they eliminate the wax bloom issue.
These versatile instruments do not have a well-documented history. While it is known that the Ancient Greeks and Romans used wax-based crayons, colored pencils do not have quite a clear past. It is known that in the 19th century they were used for marking on documents, their color making them easily distinguishable and noticeable on an otherwise black and white (or off-white) page.
Did you know that a single tree can make up to 300,000 colored pencil barrels?
The German company Staedtler, invented colored oil pastel pencils in 1834.
Faber-Castell and Caran d'Ache made the first colored pencils for art in 1924 and Berol began making them in 1938. As the years went by more manufactures began to produce colored pencils, with a few claiming that they invented the first watercolor pencil designed for artists."
How colored pencils made are made
Oil-Based vs. Wax-Based Colored Pencils
Exerpts from website: The Vitual Instructor April 4, 2016 by Matt Fussell https://thevirtualinstructor.com/blog/oil-based-vs-wax-based-colored-pencils
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Watercolor pencils, Inktense pencils, colored graphite, and pastel pencils are all pencils that feature a colored medium enclosed in a wooden shaft, but technically none of them are true colored pencils.
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So what are “true” colored pencils and why does it matter?
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Colored pencils feature a wax-based or oil-based binder. The binder, as its name implies, holds the pigment together and allows it to be spread on the drawing surface.
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Most commonly, the binder found within a colored pencil is wax-based. Oil-based colored pencils behave in a similar manner as wax-based pencils but the binder within the pencil is different.
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It can be difficult to choose which type of colored pencil is best for your particular application... the only way to know for sure which you prefer is to experiment.
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Experimentation can get quite costly, so I’ll point a few of the key differences between the two binders and how they behave so that you can make a more educated decision before you buy every pencil available out there.
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What’s The Difference Between Oil-Based Colored Pencils and Wax-Based Colored Pencils?
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We have established that it is the binder that differentiates a wax-based pencil from an oil-based one. Wax-based colored pencils utilize a waxy binder, while oil-based pencils utilize an oil-based binder.
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Wax-based pencils are far more prevalent and most brands that you find fall into this category.
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Wax-based pencils are generally easier to erase than oil-based pencils and are usually softer. (Harder core versions of wax-based pencils are also produced, such as Verithin by Prismacolor.) They layer nicely and reach a state where burnishing occurs relatively quickly, provided you are using a quality brand. When applied fully, wax-based pencils can produce an almost “buttery” surface that is conducive for blending, layering, and mixing.
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However, wax-based pencils are prone to wax bloom, a process where the waxy binder slowly evaporates to the surface of the drawing over time. This produces a light, waxy film over the surface of the drawing. Wax bloom that develops on a drawing can be easily wiped away with a damp cloth, so many consider this to be a minor drawback.
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Since wax-based pencils are softer than oil-based pencils, the cores tend to break easily. The simple act of allowing a pencil to roll off of a table onto the floor may shatter the core, and thus ruin the pencil.
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Oil-based pencils are less prevalent and may be harder to find at your local art store. They are generally only produced as a premium line of pencil. As a result, oil-based pencils are a bit pricier than their waxy counterparts.
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The core of oil-based colored pencils are a bit harder than wax-based pencils, making them less susceptible to breakage. For this same reason, the pencil keeps a sharper point for a longer period of time.
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Although they can be layered with ease, they will seldom reach the same “buttery” consistency that can be achieved with wax-based pencils. Although this waxy build up is desired by many colored pencil artists, others prefer to apply controlled layers that never reach this consistency.
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It should come as no surprise that oil-based pencils do not produce wax-bloom, since the binder is not wax-based.
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​Can Oil-Based Colored Pencils Be Used With Wax-Based Colored Pencils?
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Some mediums just don’t work well together. For example, we can only expect catastrophic results by painting with acrylics over oils. But oil-based and wax-based pencils are not such polar opposites and can be used interchangeably without any issues.
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Want to see what colored pencils the author recommended? Check out the colored pencil comparison chart.