Counterparty has the ability to ‘write in the margins’ of transactions that take place in Bitcoins and thereby extend the functionality of this currency. Ordinary Bitcoin software is not helpful for developers trying out new and innovative features. This platform has an open source protocol that has been tested extensively, where digital tokens of any kind can be created and traded by users. In addition to that, anyone can write their own digital agreements that are referred to as smart contracts, a revolutionary innovation to enable more efficient business and run these on the blockchain of Bitcoin.
As a result, business deals can now be converted into software codes and implemented automatically without any intermediary but with the built-in scripting language from Counterparty and the decentralized ledger network offered by Bitcoin. Wherever it’s not possible to use Bitcoin, the platform uses another currency called XCP to provide functionality. The implementation of all the smart contract codes can be paid for by this currency. In fact, it is an integral part of the protocol on this platform and is used as currency to vote for changes in the community.
Interestingly, this currency is the equivalent of a smaller denomination of Bitcoin and was created in January 2014 by underwriting 2,100 Bitcoins which accounted for about 2.6 million XCP. So, the process of underwriting this new currency happened with what is called “burning” of Bitcoins which effectively means ‘freezing’ the amount into a kind of non-convertible stock. In other words, the 2,100 Bitcoins have been ‘locked’ up, as the debt industry would term the process. XCP can of course, be purchased from various exchanges.
There are a few types of wallets offered by Counterparty and these are desktop wallet, web wallet, mobile wallet and another one called the Chrome extension wallet. Ensuring the security of the users’ funds is critical for all of these wallets which offer all the functionalities of the reference clients on the platform. The personal keys of the users are not stored on the servers as a rule and all transactions are signed on their devices when they use any of these wallets. Every trace of the user’s log in session gets erased when they log out. In fact, all information that the wallets send to the servers is always encrypted to ensure maximum security.
There are some good features on the Counterparty wallets that users need to note. It allows users to create new tokens and manage them on the Bitcoin blockchain as well as create and manage multi-signature addresses. Users can spread their profits in Bitcoin as well as other currencies like XCP on this platform as well as trade these coins, peer to peer; the tokens can also be stored offline by using the Armory feature. If they have any data to share, they can do so by sharing the data with Bitcoin on its network.
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