Counterparty Features

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Tokens

Custom Counterparty tokens can be used for a wide range of purposes and act as their own cryptocurrency, while still running on the Bitcoin blockchain. Unlike ordinary bitcoin, custom tokens can be used to represent any kind of value.

Tokens are being used today to:

Smart Contracts

Besides allowing users to create any kind of digital token, Counterparty enables anyone to write specific digital agreements, or programs known as Smart Contracts, and execute them on the Bitcoin blockchain. Smart contracts can be used to create “blockchain-based” versions of traditional financial instruments, or entirely novel financial instruments. These instruments can eliminate some or all counterparty risk, as well as remove the need for a central or custodial counterparty.

Counterparty’s smart contracts system is based on Ethereum, and allows contract code to be written in the Solidity language. In addition, Counterparty smart contracts may natively interact with Counterparty tokens as well as access Bitcoin transactions through the use of BTC Relay.

In uniting Bitcoin’s decentralized ledger network with Ethereum’s Solidity, Counterparty allows real-world scenarios to be transformed into code and executed automatically with no intermediation while making use of  the most secure and tested blockchain available.

Asset Exchange ("DEX")

In the physical word, exchanging assets is fraught by risks and problems, such as potential theft and reliance on an escrow agent or central counterparty. On Counterparty, the roles of escrow agent and clearing house are filled by the Counterparty protocol itself, eliminating unnecessary costs, time, and third-party trust. In any transaction the required funds are debited from each party’s address immediately, and are not released until the conditions of the contract have been met.

Payment Channels

Work on the upcoming Lightning Network promises to enable nearly instant, cheap and safe exchange of bitcoin between untrusted counterparties.

Features in Counterparty are under development that will allow for use of uni- or bi-directional payment channels with Counterparty tokens. Future work will allow the use of the Lightning Network with Counterparty, enabling rapid, decentralized and off-chain exchange of tokens that settles onto the Bitcoin blockchain.

Voting

Blockchain-based voting avoids many of the issues inherent with voting in “real world”. Digital signatures allow for identity and voting rights to be easily established and verified, and the blockchain itself provides an unalterable, append-only record of who voted, and when.

Counterparty provides multiple methods to perform fully decentralized voting on the blockchain:

XCP stake voting is under development, to allow for powerful, decentralized governance of the Counterparty protocol.

Multisignature Addresses

Multisignature transactions require signatures from more than one Bitcoin private key to spend their funds. Counterparty supports various multisignature schemes, such as 1-of-3, 2-of-3, 3-of-5, and more. Using our technology, a Bitcoin “multisignature address” may be created, and some quantity of a Counterparty token sent to it. Some quorum of signers will then be required to digitally verify and sign any transaction that sends these tokens somewhere else.

In practice, this allows for enhanced security measures around Counterparty token access and distribution. Scenarios where this could be useful include:

  • Allowing team members and third-party firms to initiate transactions that can be approved later by management,
  • allowing issuers of tokens to safely store these tokens, as well as to control their distribution, and
  • allowing third-party auditing services to ensure the delivery of goods and services once contractual obligations have been satisfied, and only release funds once verified.