What options should I set for launching counterparty-lib?

Development Counterparty
2

As the message says, you should set things like backend-password=PASSWORD in your startup script.

But an even better way is to install counterparty server (sudo pip3 install counterparty-cli, which installs both the server and client (CLI)).

  1. Install patched Bitcoin Core 0.10.2 as per http://counterparty.io/docs/bitcoin_core/
    Then start it up and let it sync (may take 1-2 days and require up to 50GB of space; use testnet if you want to wait less and don’t need mainnet).
  2. Use pip to install counterparty-cli (which will install counterparty-lib as its dependency)
  3. Edit config files server.conf (for Counterparty server) and client.conf (for the client/CLI).
    See http://counterparty.io/docs/counterparty-cli/ for more details.
    If your patched Bitcoin Core runs on testnet, don’t forget to start it with --testnet or have testnet=1 in your config files (both client and server).

You can see How do I get started developing on Counterparty? for a list of public Counterparty servers.