Counterparty Surpasses 200K Trans, Explains Crowdfunding Role, Ethereum Contracts, Symbiont’s Future
In its latest community update, Bitcoin 2.0 financial protocol Counterparty revealed news about its foundation voting, developer-level specification, new community videos, and a new version of developer application Counterblock.
More interesting, Counterparty highlighted that co-founder Robby Dermody participated in an extensive interview on podcast show Epicenter Bitcoin, where Dermody discussed Counteryparty’s growing crowdfunding role, its controversial porting of Ethereum, and Symbiont’s business model.
Since issuing its native currency back in January 2014, Counterparty has come a long way in terms of development and number of transactions on the platform. As Dermody noted, the protocol recently crossed the 200,000 transactions mark. It took the project ten months to cross 100,000 transactions in 2014 and then another four months to go from 100,000 to 200,000 transactions.
Why Did Counterparty Burn Bitcoins?
The original idea behind Counterparty was to create a financial meta layer on top of Bitcoin Blockchain that enables financial applications such as custom assets distribution and a decentralized exchange. To make it as distributed and fair as possible, the founders issued the native currency, XCP, according to a provable method called “Proof of Burn” which involves sending bitcoins to an address that “burns” them. By eschewing funding during its launch, Counterparty hopes to ensure developers and users will have equal financial opportunities.
Dermody explains the burning of Bitcoins and difference between “Proof of Work” and “Proof of Burn”:
It was a clever way to make $1.8 million to disappear ha ha. In the case of “Proof of Work”, it is electricity – you are converting that electricity and your depreciating investment in mining equipment into bitcoins or some chance to get bitcoins. With Counterparty, likewise, you are converting bitcoins and the investment into them whether you mine them or bought them. During the “Proof of Burn” period, you converted that into XCP. It allowed us to have a merit-based fair way to release this currency and get it distributed amongst a community or population without us taking on risk from the standpoint of are we issuing a security or not or in terms of US regulations.
Counterparty’s Growing Crowdfunding Role
A major substantiation of Counterparty’s model has been its growing role as platform for crowdfunding in the cryptocurrency space. Evidence of crowdfunding being a major use case for Counterparty has included big token sales for LTBCoin and Swarm, as well as the appcoin sales on blockchain 2.0 crowdfunding platform Koinify. These crowdfunding successes have illuminated Counterparty’s viability as means of raising a lot of money, as Dermody notes in the interview.
Koinify coming around was a pretty important development because the crowdfunding model at the time got some flak because people asked what if somebody just takes the money and they just don’t produce anything. Koinify refined this by having a multisig where the money raised is held in trust where there are milestones established with a third party verifying that.
Thus, with the Koinify model, you have a “neutral party” establishing that applications or software development milestones have been reached in order to release funds raised.
Counterparty’s Ethereum Smart Contracts
Counterparty’s announcement in November 2014 that it was recreating on top of the Bitcoin Blockchain the smart contracts function of competitive cryptocurrency protocol Ethereum. The news generated a lot of attention and controversy as the two open source protocols were deemed competitive, and Ethereum has its own blockchain while Counterparty is built on top of the Bitcoin Blockchain.
Dermody tried to dampen the fires of controversy:
Initally we were forking Ethereum and forking the code. There is a Python Ethereum library called PY Ethereum. We decided to fork that and keep compatibility with the Ethereum project itself.
Then, Counterparty recently changed its strategy away from forking Ethereum to actually contributing to Ethereum’s code:
We are now actually taking the PY Ethereum as is and just porting it to a newer version of Python, and contributing those changes back to Ethereum. So we are using that PY Ethereum library directly. So it benefits both Counterparty and Ethereum because we are contributing back to the Ethereum code base. We are working together more. We get that smart contract functionality that Ethereum has but we just embed that in the Bitcoin Blockchain and the Counterparty database.
The media likes to blow it up. The Counterparty vs Ripple fight to the death kind of stuff. It is not really like that at all.
Dermody also believes that difference between the block times for currency generation of Ethereum and Bitcoin are not significant. To him, the ten minute Bitcoin block time is not that long, as is demonstrated by the large amounts of people using bitcoin and Counterparty.
Will Symbiont Commercialize Counterparty’s Tech?
Dermody also addressed the cryptocurrency sector and media interest in whether Counterparty would be marketed to private industry by Symbiont, a startup that was established earlier this year by Counterparty founders Dermody, Adam Krellenstein, and Evan Wagner, and Mark Smith, the founder of MathMoneyf(x). Many observers of the cryptocurrency industry are skeptical that the Bitcoin Blockchain, with its anonymity and decentralized nature, will ever be acceptable to the banking industry.
With Symbiont, we take an overall pragmatic approach… there is going to a maturation of thoughts at the banks… When you go into private blockchain, you do not need a bitcoin token. You can get rid of it if you have a private and trusted network of participants. Yes you can lose some of the benefits that you have with bitcoin but then you can make it much more optimized. It has advantages over a plain old database because you do have cryptographically verifiable integrity, cryptographically verifiable audit trail.
This admission of marketing and development of private custom blockchains is interesting considering it is a service provided by the founders of the Counterparty protocol, a platform that is fairly wedded to the Bitcoin Blockchain. Nonetheless, it is not surprising considering that initially private industry adoption of cryptography will see a lot private blockchain usage.
Watch the Epicenter Bitcoin Interview with Robby Dermody Here