"Counterparty embeds data into regular Bitcoin transactions. To a regular Bitcoin client, these transactions look like normal Bitcoin transactions, with one party sending another party a very small amount of Bitcoin. A Counterparty node (which runs the Bitcoin client along with the Counterparty client software) will recognize and interpret the data in these Bitcoin transactions based on specific rules. From this, it constructs its own ledger of Counterparty transactions that it has seen on the Bitcoin network. To better help understand this, here is a record of a Counterparty transaction where one address is sending 48 SJCX tokens (a custom token used by Storj) to another address. Here is what this transaction looks like to a blockchain.info, a popular Bitcoin block explorer. You can see that while it is indeed a Bitcoin transaction, the amount of Bitcoin moved is small. In reality, the BTC spent is just enough to compensate the Bitcoin miners to include the transaction in a block. Essentially, the user that sent the transaction is paying the Bitcoin network to record and secure this embedded Counterparty data.
Yes. Another way to think of it is similar to a Russian nesting doll, where the bigger doll would be the Bitcoin transaction, and the next doll (inside of it) would be a Counterparty transaction. This embedding method is technically known as embedded consensus."
What we don't like:
Counterparty paved the way for platform coins and in doing so was left behind. With the amount of platform coins out now with shiny new tech it seems counterparty is left with niche projects. As the BTC blockchain fee’s grow, the Counterparty project will become less enticing.
What we like:
Counterparty was one of the first platform coins. The idea behind it is brilliant. Counterparty tokens are sent on the BTC blockchain. All tokens written on the Counterparty platform can be stored in any BTC wallet. However tokens can create their own custom wallet if they prefer. Counterparty has many tokens written on it, from games and memes, to very serious gun safety protocols.