From there, the protocol creates its own ledger of related transactions that it has seen on the underlying Bitcoin network.Īnother way to think about how transactions on Counterparty work is via the concept of nesting or Russian dolls, whereby the Bitcoin transaction would contain a smaller Counterparty transaction inside of it. Counterparty nodes simply interpret the data in these transactions based on specific rules. In that sense, it’s similar to Stacks, another platform that’s built on top of Bitcoin to provide smart contract functionality to power NFTs and decentralized finance (DeFi) applications.Īs Counterparty is Bitcoin-native and can embed and use data from the Bitcoin protocol when executing contracts, transacting on the platform looks just as it would when using BTC.
These assets aren’t limited to digital collectibles or tokens, but anything with proven rarity-even physical items.Ĭounterparty is akin to a layer-2 solution for Bitcoin: a platform built on top of Bitcoin that inherits the security of the original blockchain, but provides additional functionality. Similar to how Ethereum token standards define how certain assets work on its protocol, Counterparty provides the infrastructure that outlines how people can create unique tokens on the Bitcoin blockchain. It helped people realize that Bitcoin's design can apply to any asset or transaction that requires a degree of verification-not just an alternative form of money, or a store of value.Ĭounterparty also set the stage for the global crypto art and collectibles movement, as seen with native projects like Spells of Genesis in 2015 and Rare Pepes in 2016-both considered seminal precursors to the modern NFT boom. While this may be common today on platforms like Ethereum and Solana, at the time, Counterparty's launch marked a significant turning point in digital history. With a native decentralized exchange (DEX) and token, Counterparty was built atop the open and decentralized Bitcoin network to let users mint, buy, and sell unique digital assets.
But in the Web3 world, Counterparty refers to a “metacoin-type protocol” founded in 2014 by Robert Dermody, Adam Krellenstein, and Evan Wagner. In traditional finance lexicon, a counterparty is the other person or party participating in a transaction. Here’s a look at how Counterparty works and how it differs from more recent NFT-centric platforms, plus a look at how these assets are being bridged to a larger audience via Ethereum.
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