The latest Counterparty projects: Coins and Crowdfunding
Tuesday 17 June 2014
Counterparty is a technology that allows users to crowd-launch their own digital assets, using the bitcoin blockchain as the underlying platform. TatianaCoin recently launched on Counterparty Protocol. This week we should see SWARM, a platform to assist those who want to fund by selling tokens or shares in a project, launch itself. The popular Let's Talk Bitcoin Network seems ready to launch its own asset called LTBCoin on Counterparty in the very near future. So let's take a peek behind the launches, to see Counterparty in action.
Riding the Bitcoin Blockchain
If you imagine the world of crypto-currencies consisting of bitcoin, altcoins and meta-things that exist independent from the underlying chain, then Counterparty is definitely in the meta camp, that is to say they do not have their own blockchain.
Counterparty embeds a layer of logic into bitcoin transactions, very much like Master Protocol,
using their own format to encode their system of sending and trading assets.
It's probably fair to think about Counterparty as a slimmed down version of Master Protocol tailored for crowdfunding. Counterparty famously issued their XCP tokens using "Proof of Burn" commitment from those stakeholders buying in. Investors were taking a sufficiently long term interest as to not mind "burning" bitcoins by sending them to unspendable addresses. Is that persistent interest ready to pay off now? Multiple high-profile launches this month on the Counterparty platform seem to indicate a nascent market forming for crowdfunding by issuing tokens.
Counterparty is designed to be good at making financial bets and hedging in general, but group betting on startup projects wants to be its killer app. It bears repeating that the Counterparty strategy involves using bitcoin transactions to embed additional meaning. Using Counterparty means you're making a bet on a standardized layer that rides the strongest blockchain out there. This is the same sort of choice as using Master Protocol or Colored Coins. The opposite choice would be to create a new altcoin instead.
Popular singer/songwriter Tatiana Moroz issued her own TatianaCoin on the Counterparty platform and is currently auctioning off three million tatianacoins. The launch is being handled by CoinPowers, and 100,000 tatianacoins are auctioned off each day for thirty days. Here's how you can trade some BTC for shares of tatianacoin. You'll need some bitcoin, and you'll need to trade BTC and XCP using a Counterwallet. Start out by setting up a Counterwallet, for all your Counterparty assets. This is an online wallet, which manages your balances in your various assets. After you send some bitcoin to your Counterwallet you simply place an order to buy TATIANACOIN and sell BTC in the buy-sell section. For each address in the online wallet there is an option to create a new asset, yourcoin. Here's a nice video from Counterparty showing creation of an asset using Counterwallet. You can then pay dividends, transfer ownership of the asset and more.
SWARM aims to put a friendly and easy to use face on crowdfunding. Supporters can buy shares, the principals can issue dividends, and there are supposedly protections built into the platform to help enforce shareholders' equity positions.
SWARM is probably the best example of an application built on top of Counterparty. It is looking at the potential market for launching new crowdfunded, crypto-currency based companies and eating their own dogfood too.
SWARM launches on their own platform on June 17th and will be handing out stakes in all their future investments in exchange for early funding.
So again, the stack starts out with the Bitcoin blockchain at the foundation.
Counterparty protocol on the next layer provides the ability to do trades on user-created assets,
and SWARM facilitates the end user creation and launching of those assets.
On the Swarm site, CEO, Joel Ditez explains: "You can get coins for all of our future launches simply by having some SwarmCoin. We expect this distributed incubator model to dramatically impact how business are started and run since it has the possiblity of dramatically accelerating a company's path to market."
Launching Your Coin
People always have new ideas for projects that need backing, but launching a shiny new altcoin is not a realistic option for them. Everywhere it made sense to have gift cards or loyalty rewards programs before, finding a blockchain-based solution is the goal now. There is demand for coins which can be launched without much cost, and that pretty much rules out any altcoin launch trying to use its own chain. There are those who test the basic ideas about blockchains, and they will always want to run distinct chains. But for most of the potential "coins" out there, living on another's blockchain is the only sensible strategy.
Luckily some lightweight solutions like Counterparty that use bitcoin are coming of age, giving us some easier choices. That may soon be true for Ethereum and BitShares and others as well. But for now, on top of the bitcoin blockchain looks like a great place to operate. The barrier to entry into crypto-currency just got knocked down another notch.
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