Wednesday, September 28, 2022

Counterparty Wants to Stay on Bitcoin but Fees Remain a Contentious Issue

Counterparty Wants to Stay on Bitcoin but Fees Remain a Contentious Issue

The Counterparty Foundation has said informally it will keep the Counterparty asset creation layer running on the Bitcoin blockchain. However, there remains an active push for a more formal vote on whether to fork the project to a new blockchain to escape Bitcoin’s current high-fee conditions.

Also read: Bitcoin and Crypto’s Crazy Year: 2017 Brought Tokens, Forks – and Piles of Money

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‘Only the Dankest Pepes Can Now Be Traded’

Assets and tokens created on Counterparty use the Bitcoin blockchain for transactions. For the most part, they’re game items, appcoins and other collectables. The most well-known Counterparty projects at the moment are the “Spells of Genesis” trading cards, and “Rare Pepe” assets — collectable art pieces featuring the internet’s favorite frog troll.

Lord Kek Rare PepeThough some Rare Pepes are worth thousands of dollars, Counterparty on the whole relies on smaller transactions. These have become prohibitively expensive to perform directly on the Bitcoin blockchain as network congestion pushes per-transaction fees to an average $44 USD (at press time).

One of the Counterparty Foundation‘s community directors Shawn Leary posted a piece on the official discussion forum this week titled “To fork or not to fork, this is the question”.

“I am starting this thread to squelch a burgeoning moan from some and to bring transparency for others,” he wrote.

Counterparty needs on-chain scaling and lower fees to work as originally intended, and some had suggested shifting the entire project to something like Litecoin.

“We do need lower fees in order for the DEx (Decentralized Exchange) to work well for something like the Rare Pepe craze. Only the dankest pepes can now be traded at this time, or perhaps only bulk deals of cheaper rares. But should this powerful protocol follow the needs of cheap, albeit fun and addicting, assets?”

That said, Leary added, many came to Counterparty because it is Bitcoin, so the project anywhere else would be a different project by nature even if successful. It “feeds our (bitcoin) maximalist appetite,” he said.

In response, three other Foundation members agreed Counterparty should stick with Bitcoin, and avoid using any of the project’s funds on attempts to move it. There were no arguments in favor of a fork away — at least in this thread.

Counterparty’s native currency, XCP, got its value from a 2,000 BTC “burn” in January 2014 — token buyers “burned” bitcoins by sending them to an unusable address, creating 2.6 million XCP to fuel the network. Therefore, any attempt to move the chain completely would require a repeat of this, no matter what the ultimate benefit.

Counterparty Should Look at Other Options

[Update: Trevor Altpeter is a former, not current, Counterparty Foundation community director]

That’s not to say there is a consensus, though. Bitsonline spoke to former Foundation community director Trevor Altpeter about the opposing view and other options.

“I think LTC and BCH are both viable paths. Litecoin would be my personal suggestion. This is just a practical consideration,” he said, adding that he supports Bitcoin Core and the development direction it’s taking with Bitcoin.

However the issue remained contentious within the Counterparty community and — like Bitcoin itself — “waves of members” have likely left over the issue, Altpeter said.

It was around a year ago that members first began expressing concerns that high fees could cripple Counterparty, he continued. The issue became contentious around Spring 2017.

Now, there’s a more formal push for a fork — which is the issue Shawn Leary was trying to nip in the bud. Altpeter continued:

“Earlier in 2017, when the Counterparty community was still largely intact, I created two proposals that would have led to Counterparty moving off of Bitcoin Core. I thought Counterparty should either embrace Bitcoin Cash (at the time it was Bitcoin Classic) for the block space Counterparty needs or move to Litecoin where a metaprotocol like Counterparty would be welcome.”

Major Projects Quit the Platform, Some New Ones Reluctant to Join

The first major red flag came when (distributed storage network) Storj left, and Counterparty’s inability to make the major changes necessary following that departure, he said. Bringing new projects, like games, to the platform began to prove cost-prohibitive. Other projects are also feeling the pinch, and are finding ways to process off-chain transactions instead.

Counterparty communityConsidering a move to a new platform like LTC or BCH was necessary and “an opportunity to reinvigorate the project,” Altpeter said.

“From Counterparty’s perspective embedded consensus requires a secure blockchain and cheap block space. This makes change of some kind necessary and there are a number of eligible blockchains.”

If enhancements like SegWit and Lightning Network were able to meaningfully decrease fees, he said, it would definitely benefit Counterparty. One way or the other though, the project faced major decisions in the near future.

While Counterparty’s native XCP currency token has risen in value late in 2017 along with most others, it has been more volatile and at $32 USD it’s only about double what it has been at other points in mid-2017. That’s out of proportion to bitcoin and other assets.

Other Projects That Live on Bitcoin

Other projects that utilize the Bitcoin blockchain for non-standard transactions are also feeling the pinch. Smart contracts platform RSK and Omni Layer have also faced questions from users and stakeholders over the issue.

Omni received the now-standard gaggle of responses variously supporting LTC, BCH, and SegWit while ridiculing rival options.

Their troubles may not faze some Core developers though, who would prefer Bitcoin’s blockchain remained solely for simple value transfer. In 2014, Bitcoin contributor Luke Dashjr actually wrote a patch for one version of bitcoind that filtered out transactions it identified as Counterparty or Omni (then called Mastercoin).

There have also been accusations that Bitcoin’s network congestion is the result of deliberate “spam” transactions designed to push up fees — though this remains unproven.

What would you recommend Counterparty do? Let’s hear your thoughts in the comments.

Images via Counterparty, Pixabay, Rare Pepe Magazine

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