Bitcoin's Breakthrough is Fueling "Impossible" Future Platforms Part 2: Counterparty, Open Bazaar, and More

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Counterparty – Smart Contracts Built on Bitcoin

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Counterparty shocked the digital currency world last week by announcing that it had successfully implemented the Ethereum Project’s programming language and virtual machine into Counterparty’s system.  This is an incredible impressive feat, consider Ethereum generated over $30 million in funding to built a smart contract platform, while the Counterparty team actually required its initial investors to destroy, rather than donate, Bitcoin to start the project.  This was called “Proof of Burn”, and is the mechanism which generated all of the Counterparty platform’s currency:  XCP.

Counterparty’s currency was created in this way because it is built on top of Bitcoin’s blockchain, rather than creating its own, new network.  To quote one of the Counterparty team members, known as Cityglut on the on the Bitcointalk forums:

If you are asking why we are using proof-of-burn to initialize balances, it is because Counterparty is a layer on top of Bitcoin, and so XCP are not mined; proof-of-burn initializes balances in a fair, distributed and transparent way.

If you are asking why Counterparty was created, it is because a peer-to-peer financial market within the Bitcoin protocol is a great addition to Bitcoin and cryptocurrencies in general, and one that people have been waiting for for a while.

This brings me to the original purpose of Counterparty.  The smart contracts that have been added to the system are revolutionary, but the platform itself was already something quite amazing.  Upon its initial release, it was already functioning as a basic peer-to-peer exchange, and provided the ability for basic contracts (rather than smart contracts), which resulted in a decentralized financial market.

With the inclusion of smart contracts, Counterparty now can provide developers with a platform to develop decentralized programs, protected and processed by the Bitcoin blockchain, and only limited by the developer’s imagination.

Coin Brief is an open source website for digital news. It provides cryptocurrency tools, mining calculators, tutorials, and more. It was acquired by 99Bitcoins on September 2015.

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