What is Counterparty?

Counterparty is an innovative 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 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?

User-Friendly

With Counterparty Wallet you can start using the Counterparty platform immediately.

Open

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, risk is hedged without paying a broker, and crowdfunding is done without kickbacks to third-parties.

Safe

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.

Secure

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.

Why is Counterparty needed?

Modern finance is based around the concept of a trusted third-party middleman, who brokers deals on behalf of two or more parties. This worked well in days past, where such arrangements were simpler and financial technology less developed. However, in today’s age of financialization, globalization, and excess centralization of power, these frameworks are beginning to break down.

The crisis of 2008 was a warning call to the world about the dangers surrounding the excess concentration of power, privilege and money to too few. Still, very little has been done as a response: Complex financial derivatives continue to be created and rehypotheticated, further entangling the system in a web of excess leverage and trust requirements. Egregious practices such as market scalping, naked short selling, and blatant manipulation of market rates such as Libor and the Gold fix continue to take place in one form or another. And, countries the world over engage in extensive quantitative easing (“money printing”) policies meant largely to plug the gap created from years of debt-based phantom growth and the destruction wrought by harmful financial products and practices.

This would be one thing if it only affected those who chose to take the risks and commit these actions. However this is not the case. We are all pulled into these games, as witnessed via the shrinking size and health of the middle class in many countries, the growing sting of inflation surrounding numerous consumer prices, and the stark rise in enrollment for government assistance programs as the gap between rich and poor continues to rise. This crisis demands action, yet our politicians and mainstream finance industry seem either incapable or unwilling to to anything, and more often than not are just making what is quickly becoming an intractable situation even worse.

As the world evolves and becomes more interconnected, the structures and systems we use at the heart of finance and governance must also evolve. Technology itself has arguably enabled many of these issues, through magnifying the impact of human shortsightedness and greed. However, properly conceived and deployed, technology can also provide the solution. Built on the revolutionary peer-to-peer blockchain technology that powers Bitcoin, Counterparty provides decentralized financial markets and instruments, intended to help solve these issues at hand.

Through the use of the Counterparty platform, the immense computer network powering the Bitcoin blockchain itself takes the role as the trusted third party in trades. Excess leverage and trust requirements are then eliminated as math and cryptography replace failable human logic and greed. Finance can continue to evolve to suit the demands of a global economy, but this time with built-in protections that prevent the system itself from being gamed by those in positions of power or influence.

This is the purpose behind Counterparty, and we offer the vision of a better tomorrow, founded on the basis of truly free and fair markets.

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8 COMMENTS

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