Bitcoin’s Twin or Counterparty (XCP) Cryptocurrency: what is it?in Altcoins, Know-it-all
Counterparty is an innovative crypto platform for peer-to-peer markets and financial instruments. Unlike Wall Street and other centralized financial institutions, Counterparty provides open, secure financial tools and markets that do not require a trusted third party or middleman to use. Counterparty aims to decentralize and democratize finance in the same way the Internet itself has done with creation and sharing of information.
The platform is built on top of Bitcoin and extends the functionality of the Bitcoin network in new and unprecedented ways. With Counterparty, anyone with an Internet connection gains access to financial instruments that were previously cost prohibitive or not available at all. The primary goal of Counterparty is to enable entrepreneurs, developers, artists and more to build a new, productive economy: doing things that have never been done before, made possible by the amazing technology behind Counterparty. Counterparty wants to unlock the potential of “Crypto 2.0″ for thousands of people, who will then create profitable businesses, as well use the technology to further the social good.
What is XCP?
XCP is the native crypto token of Counterparty. It is a technical necessity for adding advanced features to Counterparty, which by nature require a protocol-aware currency. Bitcoin can only be aware of BTC, while Counterparty can be aware of both BTC and XCP itself. This makes it possible to escrow funds, trade in a decentralized manner, and harness the full potential of programmable money. Note: It is a common misconception that XCP is a competitor to Bitcoin, when in fact it cannot exist without it. And even though XCP is not a traditional currency, it serves a steady and critical purpose within the Counterparty ecosystem.
How was XCP launched?
The supply of XCP was created in a process called ‘proof-of-burn’ that lasted from January 2nd to February 3rd, 2014 (5000 Bitcoin blocks). During this period, anyone was able to exchange bitcoins for XCP automatically on a protocol level under the following conditions:
- Users sent their BTC to a verifiably unspendable Bitcoin address with no known private key. (1CounterpartyXXXXXXXXXXXXXXXUWLpVr)
- Each BTC was automatically exchanged for a number of XCP between 1000 and 1500, with more being rewarded the earlier the burn took place.
- The reward bonus decreased linearly with the block index.
- Each address was limited to 1 BTC.
Since the BTC on the burn address will never be spendable again, they are considered destroyed or ‘burned’. The main advantage of using this process is to create an equal opportunity for all users, including the founders of the project. The result is that nobody started out with a pre-existing supply of XCP. This method is relatively rare in the crypto space, because it does not provide the founders with starting capital. This, however, means that it is a truly decentralized platform similar to Bitcoin’s proof-of-work system.
A truly decentralized system without a crowdfunding has various advantages:
- Avoids issues with regulatory uncertainty and legal liability because there is no direct profit model, nor a central authority.
- Incentivises developers and users equally.
- Funds are never under the control of any 3rd party.
- Full transparency
- Zero pre-mine
Is XCP an altcoin or competitor to Bitcoin?
No. XCP cannot exist without Bitcoin, as Counterparty extends the basic features of Bitcoin with proof-of-publication, oracle betting, decentralized exchange, automatic escrow, order matching, and smart contracts.
Can more XCP be created?
No. The supply of XCP is fixed, and decreasing because of fees being burned.
What is XCP used for?
XCP is the fuel for smart contracts. When smart contracts are running, fuel is used for each execution step. Appropriately enough, this fuel is burned(destroyed). This means that the supply of XCP is continuously decreasing. However, the cost of fuel adjusts proportionally as the supply of XCP goes down so that it cannot reach 0. XCP is always the easiest token to trade against, as it is represented across all exchanges that support Counterparty. It is also used for anti-spam fees when registering named tokens, and when making distribution payments to token holders. The betting system also uses XCP.
What are Counterparty's Features?
Digital token creation
Create digital tokens (similar to stock ticker symbols) in the Counterparty marketplace, representing your organization, product, or anything else. Conduct crowdfunding via selling your tokens for Bitcoin or XDP, using our digital “vending machine” technology. Issue dividends to those who have invested in your token, awarding them from earned profits or more. “Proxy tokens” can also be created and linked to real-world assets such as commodities and foreign currencies. This can allow markets between a coin like SWARM and US Dollars, for instance.
Peer-to-peer financial market
Trade tokens with anyone else quickly and cheaply. You do not even need to know or trust the person with whom you are trading, as the system itself takes the role of the middleman, being totally trustworthy and having no need to profit off your trades.
Advanced financial instruments
Counterparty boasts financial instruments such as binary options and contracts for difference (similar to options), that are fully collateralized and work without requiring you to know or trust the other party. Support for additional instruments such as options, swaps, and futures are on the horizon.
What are Counterparty's Benefits?
With Counterparty Wallet you can start using the Counterparty platform immediately.
As a community-driven, open-source project, we’re building a grassroots movement to free up the world’s markets from centralized control. With Counterparty, you can take part in a global financial marketplace, where bonds and commodities are traded with no exchange fees, the risk is hedged without paying a broker, and crowdfunding is done without kickbacks to third-parties.
Counterparty has a built-in escrow service that holds your funds until your transactions are complete, entirely eliminating the need for a trusted third-party. There is no bank account that can be seized and no company server that can be hacked. Counterparty keeps an indisputable record of ownership embedded in the Bitcoin blockchain, which is stored safely on thousands of computers all over the world.
All of the source code underlying Counterparty is publicly available, and has been audited and has been audited by several top-tier security experts. The Counterparty development team, on which Counterparty is based, operates a generous bug bounty program to incentivize others to review and help harden the code.
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