What I don't understand is how one can benefit using an alt-coin platform to issue digital tokens (shares, bonds, vouchers, etc), when this is possible using bitcoin directly (colored coins / open-assets protocol). Is it just that some altcoins are further along in their user interfaces?
The hugely beneficial thing about colored coins (in addition to not requiring one to purchase an altcoin) is that they can be traded in a trustless p2p manner for bitcoins (using coinjoin).
Firstly, In the case of counterparty you can utilise the protocol
without interacting with any proprietary token. It's a common misconception that you need XCP token to buy and trade. I don't think the UI factors much into this argument at all, especially considering most complain about it.
I admit I haven't investigated Counterparty, mostly because I was put off by "another alt-coin." I don't see why services need to keep creating new coins, we already have bitcoin.
Counterparty is an abstraction layer ontop of Bitcoin blockchain to enabled advanced crypto-financial markets which aren't supported by default in it's current incarnation. It's not a competitor 'altcoin' -- this is another common misconception. - It enriches the bitcoin ecosystem as it matures.
But then why does XCP trade like a currency on alt-coin exchanges and why is its market cap reported at coinmarketcap.com? I would be interested in something like Counterparty if I could use all of its features by paying in bitcoin. I would be interested in purchasing crypto-equity in something like Counterparty if it paid dividends in bitcoin.
If you'd tried to do anything worthwile with what is, at the current time the most mature colored coin implementation (coinprism) and then tried CounterParty to achieve the same ends it should be crystal clear why one is the superior option.
I agree that support for colored coins is still immature, but I'm more interested in what
will be possible. What can Counterparty do that couldn't be done for free using current or future bitcoin infrastructure?
Creation & management of smart property and the subsequent exchange of them are only a subset of the features of counterparty. Here's an example of the betting functionality being put to good use:
XBet– the world's first distributed betting application You could not do such a thing with colored coins.
That looks interesting, but I'm still put off by XCP. Why can't the contracts be paid in bitcoin with Counterparty acting like a service provider (if that's what it is)?
I'm not sure how Colored coins & Coinjoin would auto-make trustless & p2p trades between two parties like you said, just seems like you'd have slightly more private purchase of a colored coin that you'd have to arrange via separate channel.
Colored coins are "encoded" in OP_RETURN outputs. If Bob wants to purchase Alice's colored coins, he can create an unsigned bitcoinTX that spends Alice's colored coins to his address and his bitcoins to Alice's address. If both Alice and Bob sign the transaction, it will get mined. If either one of them doesn't, it won't. If either one of them "double spends" the transaction is void (so no one loses).
Here's something else that's useful with colored coins: a service like Counterparty could sell XCP colored coins (which are really shares). These shares could trade in a trustless decentralized manner using the open-assets protocol. If the service earns a lot of bitcoin (because people are using it), then it could issue dividends directly to each bitcoin address where the XCP-shares are located.
With CounterParty token/token trades are escrowed by the protocol, the exchange engine, order matches, btcpay etc are baked right in (amongst a whole host of other features). Anyone is free to setup a node.
with Vennd (which is an app built upon counterparty) you can interact with a vending machine which would enable crowdfunding in a basic mode (bidirectional in enhanced mode), EG BTC in and COMPANYSHARES out. or 2 way bridged gateway between any alt (litecoin or monero for instance) and assets distributed on DeX. It's already possible to buy and sell silver/gold purely in a decentralised fashion using counterparty, in future it will be feasible for someone to distribute native assets backed by real value on an as/needed basis.
A huge driving force of the value of BTC will be the utility of it's blockchain, after all that's the truly fascinating part of the whole invention; I think it pays to keep an eye on exciting technology like this.
I don't see why this can't be done in directly with bitcoins. For example, I can already create colored coins that represent grams of gold using Coinprism (I'd probably want to add a few more details to the "issuing" procedure…). These gold-grams could trade p2p via color-aware bitcoin wallets.
I suppose I'm mostly put off by XCP. I feel the same way about XRP, Maidsafecoin, NXT, Ether, etc. It seems to me that these services want their "shares" to trade more like "money" because then P/E ratios won't apply when evaluating their market caps!
In my opinion, we need only one crypto-currency. Services built on top should accept bitcoin; they can still raise money by issuing shares, but shareholders should be paid dividends in bitcoin and not by "more shares in lieu of bitcoins."
I do think you should study the counterparty protocol a little bit to gain a little deeper understanding. You can indeed issue smart property directly with BTC and you can certainly issue dividends to shareholders of a created asset directly with BTC. in the case of a mining bond for example, it's the only thing that makes sense. In fact for most use cases I can't imagine anyone wanting to pay out in XCP. XCP guarantees atomicity and can be natively escrowed by the protocol,
So the proprietary token ideal in a betting system (ie CFD's) This area is ripe for innovation (BUT with vennd you can convert say BTC or MRO to CBTC or CMR in vending mode as a native counterparty asset - with this technique coinbase could issue fiat backed tokens in real time- we can get rid of the requirement of storing BTC on wallets that you don't own privkey on in order to trade- that was never what satoshi intended. Hundreds of millions of dollars have already been siphoned by such mistakes, 2014 should be the time to start changing this)
Last I checked of colored coins (coinprism private beta and public launch and a chinese implementation which isn't public) it wasn't possible to create callable assets- . Counterparty can embed tx in OP_Return outputs but there was a bit of drama with bitcoin core-devs, so they have backup mechanisms in place. I'm not sure if open-assets would be affected by the core-devs pruning or eliminating OP_RETURN as they threatened to, or whether they have a backup mechanism. The network is not designed to be an alternative to bitcoin, it's supposed to enrich bitcoin by providing an 'API' for advanced financial operations ontop of the blockchain.
Counterparty offers other interesting possibilities with feeds/broadcasts. For instance one could use it as a warrant canary or deadmans switch.
I'll keep digging on it ... but do you have good sources of information that are still around for it so I don't fumble around aimlessly?
