What is counterparty? Everything you need to know about it.
The total number of cryptocurrencies increases every day as new ICOs are launched. As the price of cryptocurrencies increase, its market share decreases. This happens because more and more cryptocurrencies are launched every day. One such digital currency is Counterparty or XCP. Its price has risen at a great pace after its launch in 2014 with the growth of more than 150%.
The Counterparty is an innovative financial platform for creating peer-to-peer markets and financial instruments. It is a decentralized platform for the creation of custom tokens. The Counterparty aims to provide open and secure financial markets and instruments which do not need a trusted third party or middlemen. It aims to decentralize the finance in the same way as the internet has done with formation and sharing of information.
The same facility is provided by Ethereum and WAVES also, but the difference is that Counterparty is built on the blockchain. It uses the Bitcoin blockchain for the creation and execution of smart contracts. This extends the functionality of the Bitcoin blockchain to unprecedented ways. This also brings a lot of security and reliability to the entire process of counterparty because it uses the popular and secured blockchain.
But, how to use counterparty? How to perform or execute all that is mentioned above. Well, XCP is the native cryptocurrency, also known as counterparty.
XCP is the fuel that empowers counterparty platform. These tokens are used to create custom tokens and execute smart contracts. XCP came into existence by using a “Proof-of-Burn” method. In this method, a specific number of Bitcoins are sent to an unspendable address and counterparty tokens, namely XCP, are generated on the Bitcoin blockchain for the exchange of the Bitcoins.
A total of 2.65 million XCP tokens were created by burning 2130 Bitcoins. Since the Bitcoins were burned, they can never be spent or use again. This implies that XCP cannot be mined. This method provides equal and fair opportunity to everyone.
The Counterparty was the world’s first decentralized digital currency exchange and the first to provide the users with the ability to create their own digital assets, price feeds, bets or issue dividends. The main goal of the counterparty is to allow the developers, entrepreneurs, and artists to develop a productive economy, which involves implementing such ideas that have never been implemented before, with the help of amazing technology behind counterparty. It wants to unlock the potential of “crypto 2.0” for all the people who want to create a profitable business as well as use the technology for further growth.
Counterparty allows you to trade tokens with anyone cheaply and quickly. You don’t need to trust or know the identity and details of the person with whom you are dealing because the system itself plays the role of an intermediary. You don’t need to provide your details also, so the system is completely trustworthy.
The creation of programmable smart contracts is one of the most powerful features of the Counterparty platform. The users can create their own decentralized applications and customized financial tokens. These smart contracts are also fully compatible with the Ethereum scripting and therefore, almost all the contracts can run on both the platforms.
The Counterparty provides you some financial instruments like contracts for difference and binary options that are fully secured. In these contracts you do not need to trust any third party. Additional support for using these financial instruments is also provided by counterparty.
Counterparty does not have its own blockchain network; instead, it uses Bitcoin’s blockchain. Therefore, the XCP transactions are originally Bitcoin’s transactions, with some additional data inserted on to it. But this additional data can be identified by the Counterparty clients only.
There is a fee for executing an XCP transaction. This fee is charged in Bitcoin as the Bitcoin blockchain validates the new transactions and ties it to the XCP. When a miner mines the Bitcoin fee, the counterparty nodes take it as a confirmation. Then XCPs are transferred from one platform to another.
Few wallets which support XCPs are CoinDaddy and Counterwallet
The Counterparty is open-source and community driven which aims to eliminate centralized control from the world. Counterparty allows you to participate in the financial marketplace, where commodities and bonds are traded without paying any fees, crowdfunding is done and risk is hedged without giving any fee to middlemen.
The source code related to counterparty is openly available. This has been carefully examined by the top security experts. Its development team operates a generous bug bounty program that hardens the code.
Counterparty keeps a record of the information regarding all the transactions in blockchain of Bitcoin, which is stored on thousands of computers safely.
Till your transactions are fully complete, the escrow service of counterparty holds your funds. This eliminates the need for trusted middlemen or third party. So, there is no bank account or a company server that can be hacked.
The counterparty platform and counterparty wallets are user-friendly, implying they can be used immediately.
The Bitcoin blockchain platform can be transformed into a betting platform with the help of counterparty. The oracles create the broadcasts of information and then the investors place bets on such broadcasts. The funds placed on the bets by the user are not accessible until the bet expires. Oracles set fees to be received for running their broadcasts.
It is the idea of granting access to private chatrooms, games, forums, and projects on the basis of the ownership of the tokens. Different types of tokens represent the different types of membership and the holder of a particular token can register and view the restricted content. The smaller fractions of these tokens can be transferred to invite new users.
The counterparty assets can be used for crowdfunding. It is better to use Counterparty-based crowdfunding platform because of the huge amount of trust involved. This will make the users less doubtful and demonstrate the legitimacy of the project.
If you possess an Altcoin that can be used to fulfill a particular purpose, then you can migrate it to the counterparty platform with the proof-of-burn system.
To integrate your multiplayer game into the global economy, the counterparty tokens can be used as the in-game currency.
The modern finance is based on the concept of a trusted third-party intermediary, which implements the deal on the behalf of all the parties. This worked well when the financial technology was simpler and less developed. But in the today’s age of globalization, financialization and excess centralization of authority, these old concepts have begun to break down.
This was completely evident from the crisis of 2008. It was a warning to the world about the likely dangers of excess concentration of power, money, and privilege to the intermediaries. But very little was done evade such dangers. The complex financial derivatives continue to be made, which further entangled the system in the web of excess trust and leverage requirements.
As the world grows and becomes more interconnected, the systems and structures that we use related to finance must also evolve. Although technology has itself enabled many issues due to the human greed and short-sightedness but a properly deployed and conceived technology can definitely provide a solution.
Built on a revolutionary peer-to-peer technology which works behind Bitcoin, counterparty provides decentralized financial instruments and marketplace which can help in solving such issues.
With the use of counterparty platform, the enormous computer network powering the blockchain takes the role of the trusted third party in trades. The trust requirements are eliminated as cryptography and math replace the human logic and greed. The finance will continue to grow to suit the demands of the economy but now we have built-in protections which prevent the system from being hacked by those in power.
That’s all about counterparty and its goal. It offers the vision of a better tomorrow on the basis of truly fair and free markets.
Also Read: What is NEO Cryptocurrency?
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