Editor’s note: The quote “It is not possible to start running a contract on Counterparty testnet with the current node” has been edited to reflect that it is “now possible” to run a contract on the testnet with the existing code.
Counterparty, the technology for decentralized financial tools on the Bitcoin blockchain, has started running Ethereum smart contracts by porting the Ethereum Virtual Machine (EVM) to its codebase.
In late 2014, Counterparty added their support to execute the Ethereum smart contracts platform on Bitcoin; however, at that time, Ethereum was in its pre-alpha stage of development, with its first major release, Frontier, not yet being announced. Of course, with both Frontier, and later, the release of Homestead in late February, the developers at Counterparty have witnessed the EVM growing nicely. The end result was to create a contract that would work with Ethereum, Counterparty, and Bitcoin, which they seem to have achieved, according to Counterparty Core Developer, Ruben de Vries. He stated:
It is now possible to start running a contract on Counterparty testnet with the current code.
Speaking to CCN, director of the Counterparty Foundation, Trevor Altpeter, said that Ethereum’s added functionality on the Bitcoin blockchain means that Counterparty’s EVM can do everything that Ethereum is able to do except it occurs on the Bitcoin blockchain instead.
The only differences are Bitcoin specific such as longer block times compared to Ethereum,” he said. “Counterparty’s EVM port will allow users to create and deploy decentralized autonomous organizations (DAOs), DAPPS, and smart contracts on the Bitcoin blockchain.
Since its introduction in 2009, Bitcoin has been the most widely used digital currency, the most valuable digital currency, and the most secure blockchain. Naturally, then, Ethereum’s added functionality on the blockchain means that the security provided by the digital currency is one of the largest benefits relative to any other existing blockchains.
Another benefit is the fact that Counterparty uses Bitcoin addresses directly, which is “the logical progression given Bitcoin’s currency dominance in cryptocurrency,” said Altpeter. “It has the added benefit of limiting the number of blockchains, private keys, and various coin specifics that must be managed when interacting with one or more alternative blockchains.
Put simply, this means you can hold Bitcoin, Counterparty (XCP), and Counterparty assets in the same Bitcoin address where they can all share one private key making key management and security much easier.
Porting the EVM permits Counterparty to facilitate Ethereum style smart contracts on the Bitcoin blockchain. This is because the smart contracts on Ethereum and Counterparty share a common coding language called Solidity. It is this ability to use the exact same coding language for the smart contracts that enables developers who are able to make use of Ethereum to make use of Counterparty’s EVM too.
Counterparty is more interested in working with Ethereum than causing hostility,” said Altpeter. “This ultimately means an increased amount of developers who can take advantage of these new features.
If Bitcoin experiences more long-term success than Ethereum some developers may choose to use Counterparty’s EVM on Bitcoin instead, but if Ethereum is ultimately unsuccessful, which is not what we are hoping for, developers familiar with Solidity can keep moving forward.
Counterparty EVM Benefits
The benefits of Counterparty’s EVM port regarding Bitcoin is the ability to execute smart contracts on the Bitcoin blockchain, whereas specific to Counterparty, the benefits extend to the use of Counterparty assets within the EVM.
Counterparty assets can be used as access tokens, in-game currencies, or cryptocurrencies in their own right, such as Storj, which was launched via Counterparty and is a decentralized cloud storage service that is currently a part of Microsoft’s Blockchain as a Service (BaaS) platform,” said Altpeter. “Most use cases for Counterparty assets and smart contracts are likely yet to be discovered due to how new this technology is.
Of course, from the perspective of a Bitcoin user, this port is important for the long-term health of Bitcoin. Every project lost to Ethereum due to Bitcoin’s technical limitations constitutes a loss of developer talent, users and, critically, Bitcoin transaction fees.
Counterparty Smart Contract Hype
Recently, there has been a lot of hype surrounding smart contracts, but Counterparty’s view is that it will take some time for smart contracts to reach their full potential, similar to the trajectory of Bitcoin. It is important to understand that most uses for smart contracts rely on the ability to escrow value and since Bitcoin is the most valuable blockchain by a substantial margin it is the only blockchain that currently accommodates this niche.
Use cases for smart contracts that involve escrowing value are dependent on Bitcoin and Ethereum continuing to increase in value,” said Altpeter. “If these cryptocurrencies continue to grow in value, you will see smart contract uses grow in tandem.
Images from Shutterstock and Counterparty.