But the water droplets that serve to refract the light to make what we see as a rainbow aren't producing the light or the color, are they? The wavelengths we see as 'color' were embedded in the white light created by the physical object that produced the light.
Out of scientific litterature, most of the litterature about 'color' is actually about color perception. 'Water' diffracts light, it is not an interaction, that is an optical effect. What produced lght that is diffracted by a waterfall or just rain is the sun. Now how to refer to the drop of water in that occurence ? Water is an transparent environment where the speed of light drops, resulting in diffraction. The effect varies with the lenght of the lightwaves, that's why the components of white light are seen appart from each other. But damn, there is also the matter of reflexion and the usual word used is object. Actually, if there is no alternative to be found, material will have to do.