To those unaware of what Counterparty is, it is a peer-to-peer financial platform built on the Bitcoin blockchain. It has no formal corporate structure, but rather consists of a core team which handles the vast majority of technical and business development. It should be noted that counterparty is not under control of a formal organization or anything of that sort, therefore, achieving true decentralization.

Today, Counterparty has great news for its current and future users. They have added support for multi-signature addresses enabling smart contract capabilities for every transaction. The official press release reads:

“Counterparty, the peer-to-peer, decentralized exchange that gives users the power to create and trade their own tokens for bitcoins and XCP, as well as speculate and hedge against currencies, commodities and virtually anything else, today announced that it now supports 1-of-2, 2-of-2, 1-of-3, 2-of-3 and 3-of-3 multiple-signature addresses, creating smart contracts for every transaction.”

This is a very interesting announcement by Counterparty as many people use multi-signature wallets for their daily transactions thanks to their ability to beef up security to prevent Bitcoin theft. It consists of having two or three different keys that are needed to access your wallet, which are stored in different computers or hosts. Even though it requires two keys in order to steal the coins, users can manage and send their coins directly from their wallet by having at least one key.

“This new development means that exchange participants gain the extra security implicit in multi-signature solutions, where one or more out of the total number of addresses are required to complete a transaction, providing a flexible safety net of redundancy against losing a key while also protecting against theft,” the press release reads.

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But don’t worry if you don’t quite understand how the process works yet as it is not as simple as it sounds. Thankfully, the development team at Counterparty provided a real world example on how these multi-signature addresses work:

“As an example, Alice agrees to trade Bob her digital token that represents an ounce of gold for an actual ounce of gold. However, without multi-signature addresses, both parties are assuming a risk that the other will follow through on the deal. With 2-of-3 multi-signature support, a third-party escrow party, Sally, can become involved. The digital token is stored in Sally’s 2-of-3 multi-signature address and if either Bob or Alice tries to cheat the other, Sally can arbitrate.”

This is an important step taken by Counterparty to improve its security capabilities and foster growth of P2P finance. Moreover, it strengthens the concept of a decentralized exchange while reducing risk for users - a very crucial step if any cryptocurrency is to become attractive to the average consumer.

“As a leader on the road to more open and fair markets, we’re proud to be able to offer the latest in technological financial security to our users,” said Evan Wagner, who along with Robby Dermody and Adam Krellenstein, founded Counterparty in December 2013. “As our name implies, we’re working to eliminate counterparty risk in the digital currency arena.”


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