Counterparty is a free and open platform that puts powerful financial tools in the hands of everyone with an Internet connection. By harnessing the power of the Bitcoin network, Counterparty creates a robust and secure marketplace directly on the Bitcoin blockchain, extending Bitcoin’s functionality from a peer-to-peer payment network into a full fledged peer-to-peer financial platform.
In addition to sending money without third-party intermediation you can trade, do business, and engage in advanced financial contracts without having to trust anyone else to hold your funds or do your accounting. Along with the Counterparty protocol, the platform consists of the native XCP token to perform advanced operations, and the secure, browser-based Counterwallet to provide the functionality.
The Counterparty Protocol
Counterparty works by storing extra data in regular Bitcoin transactions, which makes every Counterparty transaction a Bitcoin transaction, albeit a very small one. When Counterparty transactions are broadcast to the Bitcoin network they are verified by Bitcoin miners and saved in the Bitcoin blockchain to make a secure, verifiable record.
Bitcoin’s proven technology is the bedrock upon which the Counterparty platform sits. The hashing power that secures the Bitcoin network (by far the most secure blockchain in the world) also secures Counterparty, and the fees that Counterparty pays to the network in-turn support Bitcoin.
The Counterparty protocol itself cannot debit bitcoin, so Counterparty’s native currency is needed to manage escrow and clearing house operations. XCP allows users to engage in derivatives, games, and also unlocks advanced asset functionality. For example, user-created tokens are paid for using XCP, at the rate of 0.5 XCP per token issuance.
The creation of XCP was by a process of “burning” bitcoins, which involved sending coins to an unspendable address in exchange for XCP, and ensuring an even and fair distribution of the currency. In January 2014, over 2,100 bitcoins were burned, creating over 2.6 million XCP. You can purchase XCP through several exchanges.
Counterparty currently has three different types of wallets: the web wallet, Counterwallet, mobile wallets and the Chrome extension wallet which provide all of the functionality of the Counterparty’s reference client. When you use one of the Counterparty wallets, all transactions are signed on your device
and your private keys are never stored on the servers. All information sent to the servers is first encrypted by the wallet client for maximum security, and every trace of your session is erased when you log out. All you need is your unique passphrase for easy and secure access.