Final answer:
The prokaryote capable of forming colonies and producing oxygen is classified under Cyanobacteria, which is known for their photosynthetic abilities and significant role in forming Earth's atmosphere.
Step-by-step explanation:
If you have found a prokaryote that can form colonies and produce oxygen, it belongs to the lineage of Cyanobacteria. This group of bacteria is known for their photosynthetic capabilities and were critical to the formation of the Earth's atmosphere. Cyanobacteria are unique among prokaryotes because they generate oxygen as a byproduct of photosynthesis, much like plants do. Their ability to live in a variety of habitats, including some extreme environments, and their evolutionary importance due to the oxygen they produce separates them from other bacterial lineages such as Actinobacteria, Chlamydiales, Proteobacteria, and Crenarchaeota.