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Counterparty and the Asset Revolution

Op-ed - Counterparty and the Asset Revolution


How many of you heard of Counterparty (github)? Awesome, wonderful, that’s encouraging sign. How many of you have a Counterparty asset (counterwallet github)? Oh wow, I am in a good audience here. I thought it was more of a introductory course, but good. I want to try to teach how to use those assets and really start thinking what those assets mean. A lot of you are probably very depressed about the BTC price today but Counterparty is doing well and I think Counterparty is here to stay. I think there’s a lot to Counterparty and I think the best way to really introduce us to power of assets in Counterparty is to kind of think back in history. For an easy example, let’s back into the year 1793, there was a coffee house in the New England colonies.

In 1793, classes capitalism was in the air, monarchies were coming to an end and there was a real spirit of commerce and there was a real enthusiasm for new model by which [they] could all could engage in trade and gain wealth and run a society. This coffeehouse was the Tontine Coffee House. There was a lot of fighting in the Tontine Coffee House, there’s a lot of trades, there’s a lot of ousters, there was a lot of speculation. There’s really a lot of the things we see in Counterparty including gambling. It wasn’t an uncommon in this coffee house for people, when the lights went out, to get the cards out and play some games and enjoy themselves. So I think that Counterparty is very similar in theme to the state of the Tontine Coffee House was in 1793.

A Counterparty as most of you know is a place to manage cryptographic assets. It’s a wallet for managing those assets. It’s a distributing exchange, a clearinghouse for all of these assets. And I think it is worth noting what happened to the Tontine Coffee House, it became the New York Stock Exchange about 30 years later and this is the prototype for what was the final version of the Tontine coffeehouse. In fact Tontine Coffee House itself converted to the New York stock exchange as it was located on Water Street and Wall Street. So we would expect the same kind of outcome here with Counterparty. I think one of the things that really separates Counterparty from everything else in the space is its use of the Bitcoin Blockchain.

I think this is really important and I think that we should give it a significant amount of credibility for this reason. In fact I think we should put all the faith we have in Bitcoin in Counterparty for this reason. I think that though there’s a lot of excitement about the altcoins. I know there is a lot of cool stuff being done in these other platforms, BitShares, the NXT, etc. They all require the trust that is not present in their blockchains. They all require a lot of trust in order to run. They need mining trust, they need mining energy, they need all of these things that are really difficult to acquire. It is difficult because blockchains work. Because blockchains work, miners are incentivized to join the longest chain. Well, guess what? [Bitcoin] is the longest chain that’s going to remain the longest chain. It’s the first mover that has that advantage.

I think a lot of the stuff that Andreas says about assets, is absolutely spot on. I think we’re headed towards the world where there are tons of altcoins but it is time to start talking about them in terms of altcoins and altchains. I don’t think that there’s a lot of competition in the altchain space. I think there’s tons of competition in the coin space and I think that’s what Counterparty does.

And in a lot of ways too, this hearkens back to the early days of the Internet. There were competing protocols for HTTP. There were commercial protocols. There were things like Gopher and nobody who wanted to do website back then or wanted to do web platform really succeeded in creating an alternative to HTTP. And I think that’s what you’re advocating with some of these altchains. It’s like you’re creating a new chain, but let’s just use the one that works. You’re never going to beat the faith that you already have in that chain that is the longest.

So for those of you don’t know, Counterparty is principally built on Bitcoin. All transactions require Bitcoin in order to persist on the network. There is an additional currency, the XCP which is itself an asset. It’s a special asset that could be thought of as a stored value in escrow or Bitcoin in escrow, but is not the principal currency of Counterparty. The principal currency is Bitcoin.

In fact, for those you don’t even have a Counterparty wallet, you are a Counterparty user or you could be. Any person can work with any of your addresses and in a Counterparty capacity and store data about you and gives you access your addresses. You are already in on Counterparty. I think this’ll be a popular realm for apps as well. The addresses that you have on a Counterparty network are not separate addresses. They are just your Bitcoin addresses. You can import your blockchain wall all the address into Counterparty, you can generate a new address straight from Counterparty but they’re all Bitcoin addresses and one of the neat things about the Bitcoin in this capacity is it attests to the intrinsic value that a lot of us have been claiming exists in Bitcoin.

It’s there as is realized by Counterparty. I think too what is cool, is that in a lot of ways the Bitcoin has been compared to digital gold and a lot of ways it is digital gold and in a lot of ways too it will function as did physical gold and that this resource, this commodity will back other platforms. It will be the basis by which we create economic systems. They will be back at some level, a little different than physical gold, but in some level by Bitcoin or by this digital gold and again this is Counterparty itself leveraging that faith in this digital gold for your own assets.

I think that it’s important to you all recognize that lets you decide to check out Counterparty, maybe it will or maybe it won’t succeed but certainly all of your work will remain there. You could always migrate it to another platform in the future should one materialize. You don’t have to worry about if the chain forking. You don’t have to worry about a lot of problem of your investment not realizing itself do a problem in the protocol because it is based on Bitcoin. It’s not going anywhere and certainly I do think the Counterparty is in it for the long term, but it’s a very low risk engagement for any of you who are thinking about how to engage in the 2.0 space.

So here is a slide which is the asset creation slide for anybody who hasn’t created a digital asset. It is exactly this simple in Counterparty. There’s a Bitcoin address to not it there at the top. There’s a name for this asset. I use the name of presentation here but it could just as easily been gold or it could have been MSFT or anything like that. There’s a description, easy enough, there’s a quantity, that how many of me these assets are available. How many shares you’re issuing or how many pounds of lead might be holding in your basket or any of these things. There is an ability to make it divisible, so are their sub units, we can spend cents, fractions of a unit and there is a callability check box. To be callable is a really feature. It allows you to issue an asset and then buy it back at a by a later time for a negotiated price.

Typically this negotiated price is flake, just some amount for the purposes of removing it from somebody but there’s some really creative applications that you can do with this. I think it’s important too that you understand that an asset is decouple from price, all assets are. They are meant to exist in the market in terms of the pricing one way or another. So there’s no declaration of price on the screen. There are options for fixing the price in the form of a vending machine. If you wanted to, you could issue your asset for a vending machine amount denoted in USD or either BTC but it could also be a Counterparty asset itself. It could be that I’m offering up sheep to for two units of wool or some such thing. That is an option that’s presented to you through vending machines. You can look into in your own time and we’ve been talking about that here in a bit.

Another nice component of assets that is also available to you, is to go to distributions. This is really popular with some of the mining pools. You’ll see that mining stake in a pool. There are numbers of pools who are doing this where they are issuing assets for your share in the pool and they’re issuing dividends to that asset which is a quick like one click process for you if you wanted to do it. It’s very straightforward. It’s a very traditional sort of use, a twentieth century use of assets and it is also important to note that asset registration costs you half an XCP to create. That’s worth knowing. That is a proof of work of sorts that prevents spam into some other things. It’s a very low cost. At the moment, it’s probably a couple of bucks and there’s about 4200 assets that are defined right now on the network.

Most of them are not being used. Most of them are in fact just squatted addresses, but the ones that are there are typically commodities and share applications, something very traditional and I think that that kind of harkens back in the Tontine Coffee House sense to, people that were coming from the old world using the new technology in a way that they knew from the old world but not using the technology in a way that the new world can use. So let’s look at more creative use of assets. Now unfortunately for as much as I love this example, they are not actually using Counterparty. I don’t know why they’re not using Counterparty other than it’s new. It’s a new business and they’re probably trying one thing at a time. I’m hoping to send this to them hereafter and the case for why it would work better on Counterparty system. We’ll see if they take me up on that.

99Gamers is a really cool website that offers a marketplace for used video games. Right now, you’re looking at The Legend of Zelda, which is for sale. The inventory isn’t held by 99Gamers. It’s an eBay-esque interface whereby listers can list their Legend of Zelda cartridges and post them for sale. There’s actually four games for sale but the image cut off with the first two. The first two listings, you’ll see that there is one Legend of Zelda for sale ads at 20 units and one at 24 units. Those units are gamercoins. Gamercoins are cool. Gamer coins are bought at the price of 1 USD per gamercoin. They have a vending machine set up on the 99Gamer site and you can buy them off of them there and you insert USD into the machine and you receive gamer coin in your account. In this example, it’s noted in that sort of quasi retro way which I like. So the marketing perspective has been managed well.

There’s no sub units in this presentation and I think it is very well coming from a branding standpoint right off the bat. Gamers know virtual currency and I think this is doing a good job of presenting it to them in that capacity. But then you ask, okay so no big deal, just marketing is all that you get from this. Well, no, there’s some really cool features you get on top of that.

So first and foremost, it lets the 99Gamers community engage in money creation which you can’t do in US dollars. Money creation of course is illegal in US currency and impractical and impossible as well, but it’s very easily done with gamercoin and in fact, that’s what they did. So even though they’re selling the gamercoins, there are more gamer coins that have been issued that were pay for it. Those additional ones that were issued were used by 99Gamers for the purposes of marketing their website.

They issue these created gamercoins to other bloggers to other YouTubers and send, “Hey, check out the service, see what you think.” And those people did that. They went ahead and check out the service and they liked it and they wrote about it and they got a community engaged and in that capacity, they were able to offload a lot of their marketing budget with this created money that cost them nothing. At some level, those represented shares in the company or some such thing that were given off, but that’s what they did. And so they offset their entire marketing budget ,I believe quite nearly, with their gamer coin creation. And then this also speaks to the value of community in a coin. Andreas talks about this as well. But when you create a community, you need a share stored value, a shared token by which they can confer value and stored energy and stored work between each other. So when you create these currencies, you’re also fostering involvement from other community members in a number of ways and we will get into that.

So this also brings up, well then why should 99Gamers use Counterparty, why can’t they just do it themselves? What is it that Counterparty brings them that they’re not getting from their existing silo? Well, the easy answer off the bat with that is that there is a lot of work that’s been done. They have a lot of effort in their shared libraries. You don’t have to worry a lot about persistence and a lot of security matters. So for programmers, easy integration and that’s a slum dunk right there. But the more specific reason economically is that you’ve created a market and I think for a lot of people this right here says enough but to spell it out more clearly,

You’re not smarter than your customers. You’re smarter than most of your customers but you’re not smarter than all of you customers and when you create a market, when you create faith in a currency, you’re allowing for people to specialize, to create value to manage their imports and exports in your created currency and you’re creating a larger community and you’re creating a greater faith and a greater contribution in your currency as well. So I think that that really is hurting 99Gamers. You can certainly imagine that 99Gamers users would want to perhaps bet on the outcome of a game play contest, maybe there’s been a twitch TV for which gamercoin would be awarded but they can’t do that because it’s in a silo.

Or even better, right now they’re only selling gamer coin for USD but what about Turkey? Maybe there is a lot of gamers in Turkey that want to buy and sell games that they can’t buy and sell games using USD, so you decentralized that when you put it into a marketplace, perhaps some enterprising individual in Turkey will take it upon themselves and create a currency creation service that will add a little [fee] on top of the 1 US dollar and he will keep that for himself. 99Gamers will be happy because they create a larger market and certainly that enterprising individual will be rewarded for his work and if community gets larger and everyone’s happier, so this is another great argument to be made for decentralizing your currency even in your own silo. And in a lot of ways the objections that I’ve seen to doing this type of thing are every similar to the objections I’ve heard like, “Why would we want to integrate Twitter or why would we want to integrate Discuss?”

These are things that, yeah, you could have done yourself but it benefits from the network effect. So by joining the larger community and joining the registries that are greater than your own site, you added value that’s greater than the sum of your parts.

And I think too that communities are really big topic certainly like a whole 2.0 website sort of trend in general, but for all of us here that are running websites, your goal and your aspiration should we create something that is a group of people that have a combined interest. We see this a lot right now where personalities are forming online and certain segments. Maybe you’re into corvettes. Well, there’s a form for corvettes and there’s YouTube channels for corvettes and there’s all of this sort of incidental networks that are themselves within the internet. They don’t have a shared currency so we will start to see that change.

When we think about what Counterparty can do, it needs to exist in the sense of how do we enable any given community to work better? How do we create a small economy? What are the imports and what are the exports of this community? What is it that the problems that they for storing value amongst themselves. So when you’re thinking about your own projects when you’re watching this, I think that you got to think about well, what problems do I have that can be tokenized? What resources or scares that I have that can be put into units so that they could be expressed on a change. In gamer coins’ case, yeah, they take in US dollars and they export gamer coin but in a lot of ways too they facilitate comers by video games and such.

And these are things that they’ve tokenized at some level and will continue to tokenize on their site and they will just be an intermediary they will be a gatekeeper.

And for those of you who are thinking about using Counterparty, certainly you are enabled as a monetary control censor to exert a lot of power over your community in that role. So I think to a very common concept of tokenization here is with most websites which in many ways have an economy where content is the important and attention is the export and so with that, let’s look a little bit into Let’s Talk Bitcoin. Let’s Talk Bitcoin probably most of you or all of you have heard of it, I’ve contributed content in the show. I like contributing content to the show. In a lot of ways that probably around I think Counterparty is working with this community. LTB started as a podcast, a smaller podcast then a larger one.

It then spread into a network where additional podcasts where added. More community involvement and more content was being generated. Articles were being written. Foreign posts were being added and then at some point, Adam Levine decided to introduce LTBcoin and when he did LTBcoin at first, I didn’t really get it. It was kind of hooky. It was kind of weird. I don’t think that Adam Levine entirely got LTBcoin but I earned some. I earned some for typing in the magic word on the site. I earned some from doing correspondents out in the field. And so I had this LTBcoin and I’m like, “Okay, well what does this do for me?” And then I realized at some point that well it does for me whatever I want it to do for me because it’s not my silo. And so I’m in a position now to perhaps offload some of the work that I don’t like to others and spend my own LTBcoin.

I hate editing. I love generating content. I’m recording this right now and I’ll be recording other events here. I don’t want to sit at home for six hours and pour over those documents but I’m sure somebody does. I bet you there’s a lot of people who weren’t here, who want to know the scoop first on the form so I’ll offer somebody an editor position. I’ll say, “Hey, why don’t you take 50 of my LTB coin and you take it.” And they’ll take me up on that and what we’ve done is we enable the specialization of labor. The economy is now more efficient. There’s more actors in the economy. There’s more faith in the economy and in the community of LTB and so I think that type of success story can happen with any of your sites for no cost to you by enabling these types of tokens.

In the case of LTBcoin, the export itself advertisements on the show so at some level, we can take these LTBcoin and sell them to others under distributed exchange for things like Bitcoin or maybe gamer coin or whatever else it is we want for our efforts. There are other examples of Bitcoin integration in LTB that I think are very significant. They are now implementing access tokens. For those of you who have been in the forms for long enough, you will be issued an early token, E-A-R-L-Y, early and with this token attached to your Bitcoin address, you will be able to access some premium features. There’s a very limited membership. The first X thousand users, I don’t remember how many it is, those people are at some level or another greater than other people in the community and you know we don’t exactly know where this is going to go. This is maybe a hokey feature, maybe it’s a great feature but these are the types of things that are being played and I think there will be some really smart uses of things like access tokens on website.

Maybe I’m investing a lot of time into LTBcoin to make it a great community and maybe I’ll sell my early token down the line when I decided ah I’m not into Bitcoin anymore or that probably won’t happen, but something like that. So yeah, we have a lot of exploring to do. There’s a lot of lessons to be learned because I think we have all of these tools that are here now.

My concern isn’t that they will be using properly whether they won’t be used so I like to get up here and tell all of you about the things you can do with it and encourage you to do that. I think that all of us are economists of one kind or another. I think most of us are really, really, really bad economists. I don’t see Jeffrey Tucker here so I’m guessing that’s true, maybe I’m wrong. But it’s important that we start experimenting and checking it out and seeing what works and writing about it and I think that there will be a lot of like grand slams that are just going to be hit up the park with somebody who really did it right and ended up controlling an entire communities, monetary supply.

And again I can’t emphasize enough that the efforts that you put into Counterparty are not wasted efforts. They’re not wasted efforts because you can always leverage the data. You don’t have to worry about the chains forking. If you decide you want to move it into another network later, it’s not a big deal. You don’t have to worry about that data going away. You could conceivably import that economy into the next one. So get started today!

And things that I’ve been thinking and these are rudimentary examples but stuff that you guys can start thinking about. You clearly have websites, many of you, and you probably think about selling advertisements or endorsements or things like that so tokenize it. Rather than sell ads for dollars or for Bitcoin, offer ad credits, either 5-minute mentions on your podcast or maybe thousand impressions on your site and tokenized it and then sell the tokens. That’s one easy thing you can do right off the bat. You can also engage in money creation once you’ve done that.

So you can do things like awarding listeners in that token or maybe you could do giveaways or something like that where perhaps the community starts to buy them and you do like a raffle and somebody wins an interview on the show or something like that. It gains faith with users and it starts to encourage them to explore as well. Other things that you can do that I’ve seen that are really cool are things like invites and tickets. So if perhaps you’re issuing for tickets for conference like Coins in the Kingdom and you have a limited early access ticket, you can have 300 of them your sell. You can issue those on the blockchain and you can sell them via a vending machine on the blockchain. Other people can turn around and sell them themselves. That may create additional faith in your network. It may also show you that the market price is too low or things like that and then additionally if you wanted your supply to be publicly inspected and validated by the community, you can do so because it’s public data.

Voting is another really interesting application I’ve seen. I’ve seen a lot of these mining pools that start using Counterparty move towards voting as a Counterparty application. I don’t even know what those votes are because I monitor the blockchain and I see them declare and I see them going on but typically it will be something like okay; we’ll issue a hundred vote shares. We give those to our hundred miners and then there’s a decision to be made, the decision to go left or to go right. So they have those tokens and they can spend it on the address that is right or they can spend it on the address that is left and then we count the tally after the date and maybe we call back those assets but the vote was held. In that example, that would enable them to buy and sell votes. So that may not be the kind of democracy you want to run on your site but it might be and then too you’ll be able to see that that is going on.

You’ll be able to audit the transition. So maybe there’s some additional programmatic rules that you want to add on top of that, the nature of the transitions that can happen with those assets could construct whatever economy you want to define or whatever platform you want to define. Again we’re in the Tontine Coffee House. This maybe a great idea or a bad one.

Gamification is really cool. I’m seeing some stuff along those routes. So we all hate Candy Crush, I know but it works for a reason and so with things like Counterparty, maybe you want to have a forumcoin for your forum. And if they sign up another user, they get an additional forum coin. If they post more, they get more forum coins. If they tweet about your forum, they get awarded those forum coins and then maybe you have a raffle or something that could be redeemed for some other outlet for them or maybe they buy ads on the forum with that. That’s the kind of thing that you can do to engage people using Counterparty.

And yeah I think you really need to think about your community in general. So on that note, we’ve seen this before, there are torrent sites typically like private torrent sites where there’s only a thousand users accepted and then you have to like plead or buy an emission to that torrent site. Well, you could instead perhaps issue access tokens for or something where you have a thousand entry tokens and these are sold by a vending machine or they’ve giving out or whatever it is and you can kind of monitor then who is active user, who is not an active user. You can entice people, perhaps, to leave the network or stay in the network if that value through that torrenting site became popular, that the cost of access would go up and you can conceivably see people sell their use to somebody else and maybe there’s a better person that comes in, maybe there’s a worst person comes in but these types of things can happen because it’s outside of your silo now and these are decentralized tokens.

There’s a couple of people doing this in the mobile space, so Gems is one example. I don’t know if this project will work or not but it’s a really well designed website and the product itself might be pretty stellar. Gems are what you can earn by using this app. It is a kind of instant messaging/telegram sort of app. So iMessage that kind of thing and as you invite people and as you use it, you earn gems. Those gems can then be redeemed for unsolicited bulk messages, you know, spam to other customers. So maybe it will work really well, maybe it will reach the total spam cesspod, I don’t know but it’s a cool app that we’ve never really had before.

Similarly there’s a mobile app called Bitsies. Bitsies is kind of cool too. Bitsies allows you to post pictures either blurry pictures or one picture out of a gallery for which Bitsies must be spent in order to see the rest of the gallery and has a very Instagram-esque interface and when you post these messages to people, you can post a teaser, you can then receive Bitsies and then you can unlock the rest of the image gallery. I don’t know if it’s a porn kind of concept or if it’s not but it could be any of these things and so an app that’s kind of cool and they also use Counterparty assets for this.

Meat Space! we’re not limited to just the internet stuff. Obviously that’s where I live most of the time if you haven’t seen my goofy hat collection, but there’s plenty of apps in the real world as well. Because the mobile integration I think is pretty easy, we can expect all kinds of stuff here. So right now, there’s a major problem that we all have which is the stupid customer loyalty program tickets that we can redeem for free stuff or discounted pricing and all of these things.

Well, in the case of Counterparty, again we’re all Counterparty users. So if in this model where you’re using Bitcoin to buy your groceries, they can issue a Counterparty address to your blockchain wallet and they can read your asset list as well. So they can load you up with bonus programs or if there’s a buy 5 get 1 free program. They send that to your wallet in Bitcoin. You don’t have to opt into it. You’re already a Counterparty user so this isn’t in many ways akin to like almost cookies where I think in HTTP but you can see that you’ll have things attach to you either because you ask for it or because you didn’t, but these assets will follow your Bitcoin addresses. So imagine all kinds of applications for that. Certainly there’s some tracking systems you could do if you want to be a little nefarious although I don’t think that’s the primary use. You could do like I said things like loyalty programs.

So like these customers have been with us for a year or something like that and now he gets the discounted pricing or something. Maybe he spends $100 a month on gasoline. He’s earned $5 worth of gasoline and that will attach to your Bitcoin address and you’ll be more or less automatic if they use Counterparty on their end, at least in your interface, but we can see them for all kinds of stuff.

I know the BitNation people here are here are some pretty ambitious plans where you can think of things even like the government space where tokens could be use, things like liquor licenses or I guess well maybe medallions, I don’t know if we were still going to make that relevant, but things like that. Tickets to events of course, maybe you want to get into the front door so you either present the coin address, they scan it.

They see that you have a ticket that’s on there or you just spend it right out the gate that will let you in. Airline miles could follow around, like sort of quintessential example of private money. I don’t know if that’s meat space money or not but it might be. Coupons, everybody remembers the days of cutting coupons. Well, those could be loaded up on your blockchain wallet and you could spend them at the store thereafter. That’s very doable. Limited time offers, maybe something is available for the next day or so. They issue an asset. It’s on your phone and they call it back. So yeah I think that it will be useful in meat space as well as Bitcoin becomes more ubiquitous.

So there’s more to Counterparty than just that but I want to limit it just so to the asset aspect. It’s a new project and it’s gotten very far and very little time and it’s done that not only because of very confident leadership but because the scope of the project is very much narrow because it leverages so much from Bitcoin. Rather than reinvent Bitcoin, it just says let’s add to Bitcoin which is unlike most or all of the other projects in that space.

There are many betting features that are offered. Bets on feeds, bets on events. There are contracts for differences. There are basic option contracts and everything is fully collateralized so you don’t have to worry about any Counterparty risk and there’s more features being added all the time so this is only a project that’s been around for not even a year yet and you’re already seeing it eclipse almost every single competitor here in this space. So I have a lot of faith in this project for that reason alone.

For anybody who’s thinking about getting into Counterparty, wants to see what’s being done, you can do what I do which is the world’s most boring and ridiculous job but to monitor the blockchain for transactions and see what it is that people are doing. I’m principally limited to the Counterparty blockchain but certainly can look elsewhere but yeah looking at the website for activity is a great way to pass time if you’re a super nerd like me so you’re all encourage to do that as well if you want to see what’s happening in the space because it changes quickly.