Daniel Elkins has been hunting since at least the 1960s. His specialty was hunting and killing vampires. Elkins was once a friend of John Winchester, and mentored him on many various hunting style and way of kills, but they parted on bad terms. At some point in the past, Elkins killed Luther's family but failed to eliminate Luther himself or Kate. At some point, Elkins apparently stopped actively hunting and took on a more research-based role, like Bobby. He also may have become an alcoholic.
Daniel Elkins is in a bar writing in his journal when he notices vampires. So he quickly heads back to his cabin, and quickly heads to a safe. He unlocks the safe, only to be confronted by the vampires. He attempts to load the gun, but is too late, and is killed by the vampires. During this time, the vampires steal the Colt from him.
With his death, it draws out Sam and Dean Winchester, who recognized the name in the paper (Dean saw it in dad's journal). So they go investigate the cabin, and Sam finds a drop box location. At the drop box, they are reunited with John again, and he reads the letter Daniel addressed to him. In this letter, John finds out that Daniel had the colt.
It is shown that Daniel had the Colt for a while, long before John and Mary were even married. When Dean is sent back in time, he attempts to take the Colt to use it to kill Azazel. Daniel catches him and threatens him with a shotgun, and Dean points the gun at Daniel. Dean manages to convince Daniel to let him borrow the Colt for a few days, assuring him that he will leave it at the Campbells' house for Daniel to retrieve.
Sam and Dean go back to 1861 and borrow the Colt from Samuel Colt then use it to kill the Phoenix. Dean drops the Colt just before he and Sam are transported back to the present day. It is possible that the Colt was retrieved by the saloon owner Elkins. In the present day, the Colt was originally in the possession of Elkins and it's possible that the Elkins of 1861 was an ancestor who passed it down to him.