Counterparty Protocol - Use Cases

Hi folks,

Can we discuss the potential use cases for the Counterparty Protocol in real world situations? Scenarios need not exclusively use Counterparty but ideally it’s usage would form the basis of solving a problem. Ultimately Counterparty has to solve real world problems or bypass existing inefficient/ineffective solutions for it to be widely adopted.


You beat me to this, Alias! :wink:

To start things off, I am going to cross-post a use-case scenario I proposed on bitcointalk:

One possible use of asset issuances is to create a sort of currency peg. Here’s one way to do this.

Let’s suppose Mt. Gox issues MTGOXUSD and John buys “100 MTGOXUSD” for $100 worth of XCP plus some premium, on the premise that he can redeem his 100 MTGOXUSD for $100 worth of XCP before a certain block, which can be specified either off-chain or in the asset description on-chain. John can redeem his MTGOXUSD either through the distributed exchange or by sending his MTGOXUSD to an address provided by Mt. Gox. John can of course also trade his MTGOXUSD with other users.

Mt. Gox can offer MTGOXUSD1, MTGOXUSD2, etc. each with its own expiration block; presumably the further in the future the expiration block is, the higher the premium the voucher will carry.

The risk that the vouchers will not be redeemed is inversely proportional to the price premium, and to the issuer’s reputation.

Illiquid Asset Financing: Reducing costs and increasing distribution

One of the problems of illiquid assets is that the market for these are extremely limited and constrained even at the institutional finance level. For example, although it would be possible to issue securities against a ruby mine, finding a large number of willing buyers of a security backed by a ruby mine will be limited to institutional investors or to large banks that had distribution for an ETF of these rubies.

However, with Counterparty Assets, it may be possible for asset owners to more cheaply issue coins (the new securities) against their assets. Of course, this does not remove the problem of custodian systems and verification of the assets, but it does allow even groups of people to create coins backed by assets in a way that is mostly limited to large institutional players that require high fees to securitize an asset. Counterparty can be expected to be inefficient in its alpha phase, but will improve as more varied assets come online with different requirements that will allow us to extend the protocol.

Well it’s a little late for this kind of question isn’t it? Perhaps we should have thought about that before we burned a couple of megabucks on it.