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name: bitcoin-l2-counterparty description: | Counterparty: legacy Bitcoin meta-protocol (2014) for assets, DEX, betting using OP_RETURN. Usage is largely historic, but the reference implementation still ships protocol upgrades (AMM pools, Taproot envelopes) as of September 2026. USE WHEN: dealing with legacy Counterparty assets, understanding pre-Ordinals asset ecosystem, evaluating obsolete patterns. allowed-tools: Read, Grep, Glob

Counterparty (XCP)

Counterparty is one of Bitcoin's earliest meta-protocols (2014). It embeds asset / smart-contract metadata in Bitcoin transactions via OP_RETURN, enabling token issuance, DEX trades, betting, and asset management.

Mechanics

• Counterparty data is embedded in OP_RETURN outputs of Bitcoin txs; since Counterparty Core v11.0.0 (May 2025), activating at block 902,000 (mined 20 June 2025), it can also ride in a Taproot envelope, and P2SH data encoding was removed.
• A separate Counterparty parser reads Bitcoin blockchain, extracts Counterparty events, maintains state.
• Native token: XCP (used for issuance fees, betting).
• Asset issuance: a named asset (4-12 base-26 characters, not starting with A) costs 0.5 XCP, burned. Numeric assets (A followed by an integer in [26^12+1, 2^64-1], i.e. 18-21 character names) are free, as are subassets since the free_subassets gate at mainnet block 866,000.

Major past events

• Rare Pepes (2016-2017): NFT-precursor on Counterparty (long before Ordinals).
• SaruTobi (mobile game with XCP economy).
• PEPECASH and other community tokens.

Status

• Network is still operational (as of September 2026).
• Activity is dramatically lower than 2014-2017 peak.
• Most users have migrated to Ethereum / Stacks for new asset issuance.
• Ordinals + Runes effectively replaced Counterparty for new "Bitcoin native asset" use cases (with much higher activity).

Why usage is mostly historic

• Newer protocols (Stacks, Liquid, Taproot Assets, RGB) and Ordinals/Runes provide better UX + more functionality for new issuance.
• Wallet and app tooling is thin next to the Ordinals ecosystem.
• Historically the encoding was OP_RETURN-only, so fees on larger messages were not competitive; Taproot envelope encoding landed in v11.0.0 (May 2025) specifically to reduce that cost.
• The implementation is not dormant — see "Protocol development (2025-2026)" below.

Protocol development (2025-2026)

The "historic" framing applies to usage, not the codebase. Releases below are current as of September 2026.

• v11.0.0 (27 May 2025, gate at mainnet block 902,000) — Taproot envelope encoding, P2SH data encoding removed, CBOR for sweep / enhanced send / fairminter / fairmint / issuance / broadcast, Bech32 P2WSH+P2TR fixes, optional inscription on compose (inscription, mime_type).
• v11.1.0 (20 May 2026, amm_pools and indefinite_orders gates at mainnet block 952,800) — constant-product AMM pools with LP tokens, message types pooldeposit (120) / poolwithdraw (121), DEX match() interleaving pool fills with the resting book; indefinite orders (expiration=0), MAX_EXPIRATION 8064 -> 65535.
• v11.2.0 (8 July 2026, gates at mainnet block 961,100) — gated fixes for sweep zero balances, P2MS UTXO addresses, AMM price routing and deposit overflow; ledger DB compaction, stricter API parameter validation.
• v11.3.0 (16 August 2026) — hardening after the 2026-07-15 API incident, legacy v1 JSON-RPC off by default (--enable-api-v1), correct_transaction_fee gate at mainnet block 966,200 (roughly 9 September 2026).

Architecture

• Counterparty federated server: maintains the parsed state, answers queries.
• counterparty-core — the reference implementation (Python server plus a Rust indexer, counterparty-rs). Current release is v11.3.0 (16 August 2026).
• counterparty-client — interact with the network.
• Counterwallet — historical web wallet (still functional).

Asset model

• Numerical asset names (anyone-can-issue) and named assets (0.5 XCP fee, owner-controlled).
• Subassets (MAIN.SUB) supported, free to register since mainnet block 866,000.
• Asset transfers, issuances, callbacks via Counterparty txs.

Use cases (current, niche)

• Rare Pepe collection trading.
• Legacy XCP-based games.
• Historical preservation — early-NFT history runs through Counterparty.

Compared to Ordinals

Aspect	Counterparty	Ordinals
Year	2014	2023
Storage	OP_RETURN, Taproot envelope (v11.0.0+)	Inscriptions in witness
Token spec	Native	BRC-20 (overlay)
Active use	Niche	Very active
New issuance	Rare	Constant

See also

• ../metaprotocols/ordinals/SKILL.md
• stacks/SKILL.md
• liquid/SKILL.md