S16 E14: Adam Krellenstein on Counterparty & Bitcoin Tokens

0:47Vlad CosteaHello there and welcome to the Bitcoin Takeover Podcast. This is Season 16, Episode 14. We are live with Adam Krellenstein. And this show is sponsored by LayerTwo Labs, Citrea, SideShift.ai, Blockchain, not Blockchain, Bitcoin.com News, and Noones.com, and Hodling.ch. It's really good to have you, Adam. You are one of the three co-founders of the Counterparty protocol on Bitcoin. And currently, you're also the maintainer. I know that you've left this space in 2015. You came back last year, I think. And it's pretty exciting to have you around.

1:21You're a true OG.

1:23Adam KrellensteinThank you very much. Thanks for having me on the podcast.

1:26Vlad CosteaSo let me ask you this, because today, we have all of these token protocols. We have networks that were built purposely for issuing tokens. We live in the pump.fun era, where you just, you know, with a few clicks on Solana, you can issue a new token. But Counterparty uses Bitcoin for paying the transaction fee. It uses the Bitcoin network for storing the OP_RETURN data. It's more sophisticated. It's also arguably more permanent. But what are the reasons for anyone to use Counterparty today as opposed to something else?

2:04Adam KrellensteinYeah, that's a good question. There's definitely a lot of, yeah, a lot of other options out there right now. Part of the reason that there's so many options is because Counterparty was really one of the first token issuance platforms. Counterparty was, you know, where Spells of Genesis was created. And that was, I think, maybe the first ever NFT platform, or collection, rather. And, of course, Rare Pepes were created on Counterparty. So there's a lot of historical gravitas to the Counterparty protocol. In terms of today, the reasons to use Counterparty are it's on Bitcoin.

2:40That's the most important thing. And it's directly on Bitcoin. It's not a sidechain. It's not a rollup. It's actually on top of Bitcoin. And you're using Bitcoin, paying Bitcoin fees for Counterparty issuances. And the second thing is that you have lots more functionality actually with Counterparty today than you do even with other NFT protocols. Not all, but many of them. And I would say generally the Bitcoin based ones. And these are features that were developed and innovated by Counterparty as early as 2014.

3:14Vlad CosteaAs far as I know, the launch of the protocol was in January of 2014. I'm not sure if it was before Omni, which used to be called Mastercoin, or they launched around the same time, but they serve sort of the same purpose.

3:30Adam KrellensteinYeah, it was around the same time. What happened is that Mastercoin had raised a bunch of money in 2013 to develop the protocol. And they released a couple of incompatible and extremely limited versions of that protocol where you could pretty much just send Mastercoin around. And you couldn't really do anything. And Counterparty, we sort of raced ahead and we built the whole thing with decentralized exchange and all of what came to be known as DeFi features, betting, trading, dividends, et cetera, et cetera. And we launched that in January. And it took a long time for Mastercoin, really, later Omni, to implement even a small fraction of those features.

4:20So I think Counterparty was really the first functional platform like it, the first functional DeFi platform. It's definitely the first decentralized exchange, first thing like it that really existed. But the original idea did come from Mastercoin. The idea of a metaprotocol originated there. And then with Counterparty, we took it and ran with it and actually built it.

4:43Vlad CosteaAlso, Counterparty, not too many people know this, but it's what basically led to the creation of the term Bitcoin maximalist, because in his blog post from 2014 or 2015, I think it was 2015, Vitalik argues with someone on Reddit who said, it's so cool that you guys are building this EVM on Ethereum, but we can just take that and put it on Counterparty and your software is going to be just pointless. It will never take off because we have Bitcoin, which is more decentralized, more resilient. It has a greater network effect.

5:20And it was because of someone making this comment about Counterparty adopting features that Vitalik wrote that article and coined the term Bitcoin maximalist. And I think it's incredible.

5:35Adam KrellensteinYeah, that might have been me. I was PhantomPhreak on Reddit. And in 2015, I built a proof of concept porting the EVM to Counterparty and therefore to Bitcoin. And Vitalik and I had a nice friendly back and forth where I implemented the EVM and then he implemented Counterparty features inside the EVM. And we always had, I think, a very friendly competition to see what the best architecture was. Yeah, but it was also a nice sharing of ideas. There was no animosity there. And it wasn't just that Counterparty is the reason that Bitcoin maximalism as a term was invented, but Vitalik has said very publicly that the reason that Ethereum exists as a separate blockchain, is Counterparty.

6:28With Counterparty, we had built smart contracts on top of Bitcoin. And there was a lot of pushback at the time from the Bitcoin Core developers to what we were doing. They didn't like it. And this started the so-called OP_RETURN wars in 2014. And that animosity and the attempts by the Bitcoin Core developers to, the unsuccessful ones, to ban and block Counterparty from Bitcoin are what convinced Vitalik and Joe Lubin to create a whole new chain, because they were worried about that censorship and they were worried about fighting for extending Bitcoin.

7:02And they correctly realized that a good alternative was to just build a new blockchain.

7:12Vlad CosteaThe person on Reddit replied to Vitalik and said, you thought metacoins were a bad idea, but an altcoin was a good one. Blah, blah, blah, blah, blah. You created a potential competitor and existential threat to Bitcoin. Of course, we would eat your innovation. Face it, it's over. You've lost.

7:12Adam KrellensteinNo, no, that wasn't me.

7:12Vlad CosteaIt was Halfhand84. So this guy became famous for inspiring Vitalik in his article, and he put this under a rather hostile example. So there was one of his own about trying to understand why Counterparty is deemed evil or too powerful or potentially dangerous to Bitcoin.

7:55There is another section which I guess was about you, but the link is broken right now. And there is this post for a rather hostile example. And this guy, I think, is what triggered Vitalik. And I think it's beautiful because it was because of Counterparty that we ended up having this term of a Bitcoin maximalist. We had this article that started it all. And I also have to ask you, when people say that Vitalik intended to build Ethereum on Bitcoin, is it specifically about Counterparty? Because I know he was also working on colored coins before that.

8:39Adam KrellensteinThere's a tweet from him saying that Ethereum would have been a Counterparty style metaprotocol if it hadn't been for the efforts of the Bitcoin Core developers to block it. So it's sort of a direct thing. Yeah, I think in general, in 2014, everyone was trying to figure out what the right way to do these things was. And it wasn't clear whether to build on top of Bitcoin or to build effectively a competitor, which is what Ethereum became in a lot of senses. I always liked having a more synergistic relationship with Bitcoin.

9:16I like Bitcoin a lot, and I think that its function as digital gold is very important. And Ethereum doesn't have that. Ethereum is just gas. Ether is just gas for the smart contract system of Ethereum. And the fact is that Counterparty was in a lot of ways ahead of its time.

9:38There was a much more pushback by the Bitcoin Core developers and by the Bitcoin community at the time to metaprotocols than I think was warranted, and I think has been proven out. At the time, the Bitcoin Core developers were panicked about the possibility of storing 80 bytes of data in an OP_RETURN, and now with SegWit and Taproot, you can store hundreds of kilobytes in a single Bitcoin transaction, and it's totally fine. And the popularity of recent colored coins, what you could call a metaprotocol, like Ordinals and Runes, shows that it works.

10:20It's totally fine. And the Bitcoin ecosystem, I think, overall benefits from having those protocols built on top of it rather than just being more altcoins.

10:31Vlad CosteaYes. And we got to get into this, right? Because you mentioned the OP_RETURN wars. Some developers were super concerned that data getting spammed on Bitcoin is going to lead to some sort of, on one hand, scalability issue. And on the other hand, I guess they were concerned that, possibly, there might be some sort of Rare Pepe or Spells of Genesis card that is more valuable than the entire block reward, and this can destroy the incentives for miners to try to double spend blocks or transactions.

11:07Adam KrellensteinYeah. I argued this extensively at the time. I don't think that's the case.

11:13It's already the case that some Bitcoin transactions are more valuable than other Bitcoin transactions, and that's why you pay different fee rates for different Bitcoin transactions. And if the value is in a Rare Pepe or something like that, that's fine. You're paying Bitcoin fees for it. And at least the clean ways of storing data in Bitcoin don't bloat the blockchain. If you're storing the data in OP_RETURN, then any node that wants to can prune that data, and it's just not important. It doesn't create some sort of major crisis.

11:44And again, people are storing, yeah, I mean, 500 times more data today in a single Bitcoin transaction, if I'm doing the math right, than people were panicked about at the time, and it's fine. Yeah, Bitcoin fees are fine.

12:01Vlad CosteaAt the same time, as David A. Johnston put it, the issue with these metaprotocols is that the network at large is not aware of what's going on. So you need some dedicated software that's being maintained and I guess also operated by some third party entity, and you have to trust that they are running a server in good faith. You have to trust that the code is good, and that there is some extra risk that's added on top, and it's not as decentralized as Bitcoin. Even though it's an OP_RETURN Bitcoin transaction, the software that is required to decipher what's happening there is not Bitcoin.

12:46Adam KrellensteinYeah, I don't agree. I think that that's technically not correct. I mean, it's not the Bitcoin Core software. It's an additional piece of software, but there isn't any, there aren't any servers that are required to use Counterparty or to run Counterparty. The way to think about the Counterparty node software is it's just an extra module that you run next to Bitcoin. It's sort of like you've added additional software to Bitcoin Core, and Bitcoin Core doesn't know about it, but it's just this other thing. And it's not really very different from the distinction between full nodes and miner nodes where you're just running different software and you're interpreting the additional data differently.

13:24It's fully compatible and it has really, in the vast majority of cases, the exact same security model as Bitcoin.

13:33Vlad CosteaAt this point, I have to ask you if you have access to view the screen of our live stream because I want to show you something.

13:42Adam KrellensteinYeah, I can look at that, sure.

13:44Vlad CosteaYou can check it on your computer, phone or whatever.

13:48Adam KrellensteinI think I see it on Twitter, yeah.

13:50Vlad CosteaThis is your Pepe, sir. It's part of the Privacy Vampires collection number 11. It was drawn by my girlfriend today, and she used the picture that you sent me for the thumbnail for inspiration. I don't know if your hair is this brown right now, but some changes can be made.

14:10Adam KrellensteinThat's very cute. Thank you. That's very, very cute. I'm a fan.

14:15Vlad CosteaI'll send it to you.

14:15Adam KrellensteinThank you.

14:15Vlad CosteaAwesome. And also for the people watching this, I promised on Twitter that there's going to be some sort of airdrop. I created this. Just a second, I need to switch tabs. It's called DAVIDPEPEBTC. It's my girlfriend's drawing of the statue of David, but turned into a Pepe and holding a Bitcoin. As you can see, the penis is also here and it has the signature of the artist on it. The description says that nowadays David slays Goliath with his Bitcoin, no slingshot required, drawn by Ani in March of 2025.

14:55So only 21 of these were issued. The supply is locked. And I'm going to give away 10 of them during this live stream. All you have to do is put your Counterparty address in the chat, and I'm going to look for that and send to the first 10 people. And another 10 have been locked in a dispenser for about 21 bucks. So everyone else who is late will have to get it from the dispenser if you want it. I don't know. I don't know why you would want this, but it's pretty cool.

15:28It's nice art and it's a nice memory of what Counterparty can do and what it does. And proceedings will go to my girlfriend. I'm not keeping any of this. But it's cool. You can do this with Counterparty. But I think part of the tradeoff when you do something like this is that the data, like the image and the description and everything is not stored on the Bitcoin nodes. Maybe this is beautiful because you're not bloating storage on full nodes. But if one of these services like Imgur or wherever you store your image gets shut down, even what was the popular one.

16:08I think it was IPFS that was being used during the NFT mania. You still have to trust that someone's going to host this for you and the representation of your token is going to be there. But there is also the conversation I've had Theo Goodman on the show like four years ago. And he was very adamant about this point that the token is the art and it's the token itself that you're buying. The name of it, the supply, the meaning that it carries and not the art.

16:39The art is just a representation of what it's supposed to mean.

16:47Adam KrellensteinYeah, I think it's complicated and subtle, the relationship between the token and the art. I think art's tricky to define, right? And what people find valuable about it is it's different and changes. I frankly am not thrilled that NFT data is stored off-chain on centralized servers. I think that that's generally counter to the idea of it. I think that it's also a solvable problem. We're actually in the process right now of developing a protocol change for Counterparty that will increase the data storage capabilities of Counterparty significantly.

17:25So you'll be able to store hundreds of kilobytes of data in a single Bitcoin transaction. And also it will reduce Counterparty fees significantly for all but the simplest transactions to make it in line with the Ordinals, what Ordinals has done for years. And we're working hard on that right now. So in the future one will be able to store the actual NFT image on Bitcoin blockchain if you want to. And in a way that's fully prunable, so nodes that don't want to store it don't have to.

17:54Vlad CosteaI was going to get to this but at the same time I have to mention the fact that when you launched Counterparty it was an attempt to bring real world assets (this was the terminology at the time) to Bitcoin. And you were thinking it's going to be useful for companies that want to stay online and decentralized to issue shares and dividends to their investors. Or maybe it could be used to tokenize commodities like gold, silver, anything else. Or stocks like Apple or Microsoft, whatever. You could do this too.

18:28But in the end it seems like art became the more popular use case. And I keep wondering why. What is it about art that is more trendy or more fun than tokenizing some real assets?

18:46Adam KrellensteinYeah, I think that's one of the ways that Counterparty, that was a wrong conception of mine. I think I was wrong about that. The original idea, as you said, was to take existing real world assets or existing financial assets and create a link to a blockchain, to Bitcoin and Counterparty. And to move existing systems to a blockchain. And I think that's still possible and it's much more possible today than it was. And I'm looking forward to it. And it's already happening. Stablecoins are a very clear example of this, where we're actually moving.

19:21There's a clear link between fiat and a digital asset. But what was really pivotal in allowing blockchains to take off in their usage and for DeFi to take off. After Counterparty was created was digitally native assets. Art was the first example of that. There were some gaming tokens and gaming art and that sort of thing. I think the financial systems tend to be heavily layered and incrementally built. When you try and move a complex off-chain asset on-chain wholesale, it's a very slow and painful process where the benefits are not super obvious.

20:05But if you start with something as simple as NFTs, then you can build lots of functionality on top of that. Then you can build markets on top of that. It's much more natural and easy to do so. The incentive to do so is much clearer. The problem is in a sense that Counterparty launched with a DEX without first having digitally native assets to trade on the DEX. At the time, the idea was to sell and trade XCP for Bitcoin and other tokens that people were creating. But there wasn't enough adoption or take-up of those at the time for it to be compelling.

20:43The usage was moderate. Now that there are billions and billions of dollars of NFTs out there and other DeFi assets, there's something to trade. That's very powerful. You can do things on blockchains that you can't do using traditional systems because of their architecture. That's very compelling as well.

21:03Vlad CosteaSomething else that I want to bring up on screen is this article that I wrote back in 2021. So it was December 29 of 2021. It's called Bitcoin NFTs on Counterparty and how to get or create your first one. It was also translated in French and in Spanish. And I see it getting a lot of clicks sometimes. The reason why I want to bring this up is that I actually put some information that's useful for myself right now about the creation of Counterparty. Because when you decided that it's going to have a token, you also burned some Bitcoin.

21:42And I want to see exactly because I also put a link here if I remember very correctly. I put a link to the transaction where you actually burned. I have to look up "burn". Yeah, so you burned 2131 Bitcoins that were sent to an address that's called 1CounterpartyXXX. The Bitcoins are still here and have been here for a long time. I see that there are still transactions that send money to this address. What's the story behind it? Why did you decide that you're going to burn 2100 something Bitcoin for the creation of this?

22:26Adam KrellensteinYeah, the inspiration was very much Bitcoin and Satoshi. Satoshi created Bitcoin to have a mining mechanism where you're actually destroying energy to create Bitcoin. And the nice thing about digital currencies and metaprotocols like Counterparty is that you don't have to do it again. If you want to create another token using the same mechanism, you can just burn Bitcoin to create XCP. You don't actually need to have any mining hardware or use any real world energy because you now have a digital token that you can use in the smart contract.

23:04And so it's a cleaner, more efficient way of doing the exact same thing. Instead of burning energy, you're burning tokens, burning Bitcoin. And yeah, the Counterparty launch was a particularly decentralized and fair launch. I think one of the most decentralized and fair in the history of cryptocurrencies. We thought that was very important. I think it's very important. I think it's important to have cryptocurrencies be decentralized. That's not to say that there weren't problems with the strategy. We didn't have any funds for the team to develop anything.

23:40We didn't have any resources. It was just a Bitcointalk forum post with a GitHub repo link. And that's about it. And that hamstrung Counterparty for a long time, specifically when it became competitive with Ethereum, which some number of months later raised $20 million, which then went to promoting and developing that technology. Counterparty was always meant to be, was always very cyberpunk and very true to the Bitcoin ethos and idea. And proof of burn, I think, is a very beautiful way of representing that.

24:22Vlad CosteaBut why was it 2,100 something Bitcoin? Why wasn't it 200?

24:28Adam KrellensteinThat's how much people decided to burn. And people could burn as much as they wanted, more or less. There was a limit on the address to encourage decentralization. But when you burned Bitcoin by sending it to this address, this unspendable address, you destroyed the Bitcoin, and then you created Counterparty in some ratio, which decreased slowly over time. And if anyone who could do it could do it. And that created XCP, the currency, de novo. So there's no limit there.

24:58Vlad CosteaSo you can argue that the supply of XCP is backed by a supply of BTC that was burned?

25:06Adam KrellensteinYou could say that in a way. I think that, you know, Bitcoin isn't really backed by the energy that's destroyed to mine it. But there's a link, and that's very important.

25:19Vlad CosteaIt's an interesting approach, because nowadays, everyone launches a token, and they don't consume any energy. They don't have any sort of expense. They print it out of thin air, and then they expect to sell it to someone else for another asset that actually requires work. So it's beautiful that you did this. But at the same time, I guess it's painful in retrospect, thinking that at 100k per Bitcoin, that was how much?

25:5420 million?

25:55Adam KrellensteinA billion, yeah. Yeah, it was a large value destruction. Probably one of the largest, most intentional value destructions of its kind. Yeah, but to create Bitcoin, I think to create new things, it wasn't a destruction. It was a conversion. It was a transmutation of Bitcoin as gold to XCP. And I think that that's a very useful paradigm, again, the same way that energy is destroyed to create Bitcoin. It should be hard to create a cryptocurrency. That's not to say that, yeah, there are problems. It turns out that if you create the money out of thin air, then you have a lot of flexibility that you wouldn't otherwise have.

26:42But the destruction wasn't just destruction. It was also creation. And XCP had value as soon as that transmutation occurred. And so overall, the net value of the system went up, and that's the important thing.

26:59Vlad CosteaYeah, right now, I'm looking at SideShift, which is one of the show's sponsors, and I checked to see if on their swapping service, they also support XCP, and it's not here. And it's slightly disappointing, because I understand why some centralized exchanges would not list XCP. But SideShift is a bit more cypherpunk. So maybe if someone from SideShift is listening, you should list XCP for swaps. At the same time, XCP, I think the best way to acquire it is to watch these dispensers, right? And I'm going to get into that.

27:34Let me finish the ad for SideShift. So they have pretty good liquidity for most of the popular coins. You can check it out. And let's say that someone pays you in stablecoins or whatever, USDT. You don't have to touch it if you don't want. You can just swap from USDT on, let's say, Ethereum to Bitcoin. You put your Bitcoin address here, and you click shift, and then you just send the person who's about to pay you the USDT address. And as soon as the payment goes through, you're going to receive Bitcoin in your wallet.

28:07And it's stress free. It's pretty cool. It's a good way for you to swap. And even if you don't know about SideShift, I guess you already do it. In wallets like Edge and Cake and whatever, it's in the background if you're swapping between coins. So check out SideShift.ai. And also, I got to tell you about Bitcoin.com news because now they know the difference between BTC and BCH. And that was in the previous episode of the show that I interviewed their CEO, their new CEO. And Bitcoin.com is now much more about the real Bitcoin and also has news about gold, about other countries that are adopting Bitcoin around the world.

28:49It's not so US-centric. And I sort of enjoy reading the news there sometimes. So go to news.bitcoin.com and check out some of the articles. They tend to be pretty good. So now I got to ask you about smart contracts, right? Because dispensers, as described by Nick Szabo when he was talking about the definition of smart contracts are sort of the first kind of smart contracts. You put some asset in there, and then you set the price for how much you want to charge for one asset.

29:24And then whoever comes in and sends a transaction of that value is going to get the asset. And Counterparty has this dispenser system and it's really beautiful.

29:36Adam KrellensteinYeah, I don't think dispensers were the first smart contracts. I think there were a lot of smart contracts that came before. That said, dispensers are extremely useful for onboarding people, especially into the Counterparty ecosystem. And it's still one of the easiest ways to get Counterparty assets. There are other ways now. Atomic swaps were released in October of last year, and that's really a nice alternative to dispensers. It's trustless in a way that dispensers are not. But yeah, when Counterparty launched, we had contracts for difference, we had betting, we had a decentralized exchange, all of which are smart contracts.

30:18Vlad CosteaAnd it was so ahead of its time, right? There were colored coins before Counterparty. But all of these features...

30:24Adam KrellensteinYeah, colored coins were just for issuing a token. You could issue the token, you could move the token and that's it. And that's a, you know, I don't know if I would call it a smart contract. It's so simple. Bitcoin itself has very simple smart contracts, right? It has multisig, it has timelock, it has features that are smart contracts. They're just very limited. And richer smart contracts were really instantiated with Counterparty in 2014.

30:57Vlad CosteaWhy is it that so much of the story about Counterparty begins and sort of ends in 2014? Because when I first discovered Counterparty, I used Counterwallet. And it seems sort of like a ghost town. It was like this utopia of what can be done on Bitcoin that was built in a pretty rough way, but never finished. Then I discovered FreeWallet, but it's freewallet.io, not freewallet.com. That's sort of a bad wallet. You don't want to make this mistake. And I discovered FreeWallet and it's much nicer, but it still feels like it's something from 2016, maybe.

31:33It was not updated in terms of user experience.

31:39Adam KrellensteinYeah, the fact is that the Counterparty ecosystem had extremely little development over a nine-year period. And that was, even though Counterparty was, there were a couple of things. One is that Counterparty was ahead of its time, right? And so it sort of took a long time for people to start using Counterparty the way that it was intended. The second thing is that there weren't, there just wasn't a lot of resources being put to it. When I left as lead maintainer, I guess really the end of 2014, early 2015, there was a trickle of development afterwards, but very little.

32:16And the code base is more or less, or was more or less the same a year and a half ago after eight or nine years. That's a problem, especially in such a fast moving space. Like you need to maintain software, you need to keep it up to date. Counterwallet was abandoned. It was developed by Robby Dermody originally. It was open source, but no one really worked on it. Part of the reason was that there wasn't any funding, right? No one had, like there was no Counterparty Foundation with a treasury to develop it.

32:47And Counterparty itself wasn't sort of valuable enough or popular enough to sort of build this flywheel ecosystem supporting it. And there was a time when that sort of changed temporarily during bull markets. But yeah, the infrastructure of the ecosystem was in a really sorry state a year and a half ago, and 15 months ago. Counterparty had some of the first centralized exchange support of any altcoin. It was the first coin listed on Poloniex. But when the software wasn't maintained, it became harder and harder to run. And user adoption didn't keep up with other coins and platforms, to say the least.

33:28So what I've been working on for the past 15 months is fixing that, is fixing the node software, getting it working, getting it running, getting it deployable, fixing just so many bugs in the protocol that sort of crept in over the years, and adding new features like the atomic swap feature that I just mentioned and other ones. Fairminters is a thing that was actually originated in Counterparty but didn't really have full protocol support. And now we have support for that. So what happens when people don't support an open source project?

34:03And that's unfortunately the kind of thing that happens in the open source ecosystem a lot. What's distinctive about Counterparty is that even though it was neglected for so long and just not maintained, it still kept its core user base. It still kept a ton of value on it, and the value on Counterparty grew. And it has this wonderful tight-knit community of people who continue to use it and continue to appreciate its OG status, even though it's a terrible pain to use and it's impossible to get XCP and so on and so forth.

34:43Vlad CosteaWell, there were people like Joe Looney who are building interesting tools. There was also J-Dog who maintained the protocol for a while. But always my criticism was that you have all of this renaissance of running a Bitcoin node with all of these cool implementations and node-in-a-box solutions and whatever, but somehow it was always difficult for normal users to run their own Counterparty server. And it would be so nice if you could have this add-on next to your node, because something like Umbrel has apps that you can install.

35:17If you can get Counterparty on Umbrel, you're basically going to increase the user base by a few thousands.

35:26Adam KrellensteinYeah, the development work that happened in the Counterparty ecosystem over the past decade was not really on the protocol, and it wasn't on the node software. It was really minimal. You know, it was dozens of commits over the course of over years. And those commits sometimes added features or made things better. Dispensers was implemented. But it also really often made it worse. There was an important patch and a protocol change in the fall of 2023, which accidentally introduced a massive critical consensus dependency for the node software.

36:05You had to run this other piece of software next to Counterparty in order for it to work, and that's been reversed now, thankfully. But it just became harder and harder and harder to run the node software. 15 months ago, it took weeks to catch a node up from scratch, and everyone was just sort of copying around databases using this bootstrap mechanism, because it was so hard to catch up with the blockchain. And there were consensus bugs just everywhere. It was really a mess. And the software was really like, saying that it was maintained is really a stretch.

36:41It was not well maintained. It wasn't kept in good shape. It was very hard to use. And that's because it's a hard thing to do. It requires dedicated effort. It's a bit of a thankless task. And what people did build was tools and services on top of that. And people started to conflate the tools, the block explorers, and what have you, with the underlying node software. It became a very centralized, vertically integrated ecosystem. Instead of having lots of block explorers and lots of wallets and then having a core team sort of maintaining the node software, it was a couple people that just sort of built their tools on top of Counterparty and didn't really improve Counterparty itself.

37:26And that was very harmful. And it caused a lot of downstream effects. And we're paying for it now. Thankfully, over the past 15 months, we've made huge, huge, huge progress to fix that. Node software catch-up has gone from weeks to, I think my last run was 10 hours. The consensus bugs have been fixed. The extraneous dependencies have been fixed. The API has been rebuilt and redesigned. New features have been implemented. So many bugs have been fixed. The CLI has been revamped. Everything is just sort of, you know, yeah, it's better and it's working.

38:03And that really should help people build on top of Counterparty and run their own Counterparty nodes in a way they really haven't been able to do for a while.

38:13Vlad CosteaYeah, I think that's pretty cool. And this also is a very good way for me to introduce the question about the hard fork, right? Because I used to check, I've created a bunch of stupid tokens on Counterparty and I used to check them out on xchain.com or I think it was xchain.io. Right now, if I type xchain, it redirects me to TokenScan. And on TokenScan, there is this notice on top of the website. And I'm going to put it on the screen. It says, notice: the Counterparty ledger experienced a fork at block 866,000.

38:52And now two ledgers exist. This site is showing the Counterparty 2.0 ledger. You may also view the Counterparty Classic ledger. So essentially, what is Counterparty 2.0? And do assets now exist on two different clients, on Classic and 2.0?

39:12Adam KrellensteinYeah, that notice is dishonest and FUD. It doesn't represent reality. What happened is that J-Dog got angry and he started running an old version of the Counterparty software and calling it Counterparty Classic. And no one uses it. It's not a real thing. He's just angry because he rage quit the whole community and the protocol and all of that. Counterparty has gone through multiple protocol upgrades like most blockchains. And I mean, you know, J-Dog just didn't like one. And so he decided to pretend that an old version was like the one true version.

39:54Coincidentally, like the last version that he nominally was maintaining. So there aren't two ledgers, there's just Counterparty. This is in the FAQ on the official website. And it's really unfortunate that that notice exists there and scares users away. I think it's really sad.

40:12Vlad CosteaI was aware that there's some drama. I had no idea it's this bad.

40:17Adam KrellensteinBut it's sort of a tempest in a teapot, right? The only outward manifestation of it is this scary notice on TokenScan. And, you know, this is not the first time that J-Dog and TokenScan have attacked the network and forked it or pretended to fork it or what have you. It's just, you know, bad personalities and like animosity. The entire rest of the ecosystem totally ignores this. And I encourage people not to use TokenScan. I know it's sort of XChain or, you know, whatever things are called these days.

40:49There are good alternatives out there. And I think that people should switch to those.

40:56Vlad CosteaYeah, but I still have to ask, what is Counterparty 2.0?

41:00Adam KrellensteinIt's not a thing. It was like an affectionate name that was given to the development that happened over the past year and a half to improve Counterparty and add new features to it. But it's not like a new version or anything. There's just been continual improvements to Counterparty and an important set of features that were released last year. But it's all fully backwards compatible and totally normal. It's not a whole new version. It's not a whole new protocol.

41:32Vlad CosteaI was thinking because in the Reddit post that I referenced from 2014, there was this mention that the EVM is going to get added to Counterparty. And this has been a major talking point, bringing Ethereum smart contracts to Bitcoin with Counterparty. And I was thinking that maybe Counterparty 2.0 is the manifestation or the implementation of that.

41:55Adam KrellensteinNo, no. So yeah, as I said, I did a proof of concept port of the EVM to Counterparty in 2014. And we didn't really have the resources to finish it. There wasn't really a strong demand for it. And there really hasn't been a lot of demand for it today. I think Counterparty would be great if it had a virtual machine. I think that it could be a lot better and more functional. The community doesn't really seem to want that. People are not excited about programmable user-created smart contracts on Counterparty.

42:29If that changes at some point, I would love to work towards implementing a virtual machine on Counterparty. But Counterparty 2.0 is just sort of the name for the protocol change that happened in September and then went live in October to add atomic swaps and fairminters as features in a very incremental way.

42:53Vlad CosteaOkay, that's really good to know. But at the same time, I believe that there is low demand for more smart contracting features on Counterparty because it's so easy to put your assets on Emblem Vault and then issue them on Ethereum or whatever. I know that during the peak of the NFT mania, people were doing this with the Rare Pepes and they were getting a lot more Ethereum, at least in terms of US dollars, than they could get in Counterparty dispensers because there was much more liquidity on OpenSea or whatever.

43:28So maybe that people think that they issue something on Counterparty, but they have other means to benefit from this extra expressivity of smart contracts somewhere else.

43:43Adam KrellensteinYeah, there are a lot of reasons for that. Again, the Counterparty ecosystem was not in a particularly healthy state even when the markets were good. There's a distinction there. People confuse the two. They think, well, prices are up and liquidity is up. Therefore, something is good in the protocol and infrastructure, and that's not the case. So people were forced to use dispensers, which have major problems. People can get rugged very easily. You can have accidental dispenses and so on and so forth. There wasn't any infrastructure. It was hard to get XCP, et cetera, so people were forced to use other solutions, which have other trade-offs.

44:26Ideally, I think people would use native Counterparty features and trade NFTs on Bitcoin, and that's now possible with the atomic swaps feature, which everyone is extremely excited about and is excited to use. The wallet support and explorer support is coming along because everyone has to build everything. Everyone has to build a lot of stuff from scratch, but there are currently, I think, three different marketplaces for atomic swaps, where you can trade your Rare Pepes for Bitcoin totally trustlessly in a single Bitcoin transaction. The hope is that even though the market is down right now, obviously, everything is dead, at the next bull market, when it comes, people will be able to use that feature instead of existing ones.

45:13Vlad CosteaWhat do you think about Layer 2 proposals for Bitcoin? I guess many of these ideas have also introduced the argument that there is no reason for these assets to exist on Layer 1, and it should be kept small and minimal, and everything with tokens should be traded on Layer 2s. I remember there was something like RGB that was introduced specifically to build something for tokens, for colored coins, but it never really took off, and I was wondering if you have any opinion about this, or let me put on my toxic maximalist hat and say, oh, this does not belong on the base layer.

45:58Someone in the chat actually mentioned that there is a mining pool, OCEAN Mining, that is censoring Ordinal inscriptions. I'm not sure about Counterparty transactions, but there is certainly a movement that's trying to discourage this from happening.

46:14Adam KrellensteinYeah, there are lots of thoughts. Layer 2s are a big space, and it encompasses everything from, I think, Counterparty as a metaprotocol to colored coins, which are extremely simple, and their own thing, to Lightning, which is purely a scalability system. I think it's important that whenever you build a new system that it have a good synergistic relation, like a new Layer 2, it have a synergistic... You shouldn't build something that either causes actual true bloat on the L1. You shouldn't be moving transactions off chain and then just settling them in some way or just finalizing them on Bitcoin.

47:01I think that that creates a bad economic incentive for people to move transactions off chain. People are always going to fight about this, but the fact is that Counterparty has been around for 11 years now. It's not going anywhere, and Luke Jr.'s mining pool or whoever can block it if they want, but it doesn't matter. There's strong economic incentives for Bitcoin miners to accept Ordinal inscriptions, and it's a good thing for the ecosystem as a whole, whether you like the art or not.

47:39Vlad CosteaI have to ask you this, because I've also mentioned Ordinal inscriptions. When we started the episode, we compared Counterparty with something like Solana or Ethereum, or maybe today it's easier to issue a token, and you don't have to understand how anything works, but we also have on Bitcoin some competition for these Counterparty assets, which is represented by BRC-20s, by Ordinal inscriptions, by Runes. What is the difference between those? They're all native on Bitcoin, but they operate in different ways, but at the same time, they try to fulfill the same purpose.

48:17Why should people still use Counterparty, and how can Counterparty interact with Ordinals?

48:28Adam KrellensteinThe biggest difference is that Counterparty is much more functional. It can do a lot more stuff than Ordinal inscriptions or Runes or BRC-20, which are just create token, send token, receive token. That's it. With Counterparty, you can do a lot more stuff. On the other hand, you can now use the atomic swap feature to trade Counterparty assets for Ordinals, for instance, trustlessly. I think it's all one big, healthy ecosystem, and it should be collaborative rather than competitive. There are multiple options, which have different trade-offs, a different architectural trade-off.

49:08The metaprotocols are different from colored coins, are different from Ordinals, but they all have their own quirks and features and things, so we should generally support interoperability between them.

49:24Vlad CosteaYeah, sorry, I got distracted sending you your Pepe. Thank you. You can check it out on Telegram and there's also a short video that shows how it was drawn. So I spoke about Layer 2s, I got to tell the listeners about the two sponsors that are trying to become part of the future of Bitcoin. One of them is LayerTwo Labs and they're trying to build pegged sidechains for pretty much every use case. There's even one for assets and tokens like Ethereum and there's another one for privacy and there's one for prediction markets and there's one for scalability and low fees.

50:03And you can actually test the software today, it's not just some sort of wild idea that was proposed. It's real software that you can download from layer2labs.com/download. You can go there and find the software for Linux, for Windows, macOS and you can go to, there's a Telegram chat that's called Drivechain Talk and you can request from users to send you some testnet coins and that can actually be useful for you to understand how the technology works and whether or not this can be the future of Bitcoin.

50:38The other project that is trying to become part of the future of Bitcoin is Citrea. They're building what they call Bitcoin's first ZK rollup and sort of like Arbitrum on Ethereum, they're trying to bring an entire suite of financial applications on Bitcoin such as lending and borrowing and I think their end game is basically to take WBTC which right now is tokenized on the Ethereum blockchain but is custodied by BitGo and make it more trust minimized and also on Bitcoin. So they're using I think actually inscriptions that they're putting into blocks, they're inscribing ZK proofs and then they're using that for their Layer 2 to have their own sort of language.

51:29It's still, I think there's a lot of similarities functionally with Counterparty and this just proves that this idea of metaprotocols was very much ahead of its time. If you want to try Citrea, you go to citrea.xyz and they have a button for their testnet and they also have a faucet through which you can get some coins. You paste your wallet address and you can have some fun today. So check that out and thank you for being sponsors of the show. Now I gotta ask you, back in 2014, what were your expectations when you launched Counterparty?

52:07Did you always believe that it's gonna be this honey badger of token protocols or did you think it's gonna be the token protocol that's gonna take over all the use cases and bring Bitcoin into the mainstream? Or what did you think about it?

52:27Adam KrellensteinI don't think we had any particular grand ambitions or expectations. The idea was to prove that you could use a blockchain for more than just Bitcoin. That was the mantra. And implement peer-to-peer finance, as we called it at the time, what's now called DeFi on a blockchain. And we did. And Counterparty ended up not being the place where most of the development and most of the energy and most of the economic value went, but it was very important for its historical position for having so many firsts.

53:00And that was really the goal. And I think we achieved that. We showed that you could build all of this stuff. And it turned out that when other people built it, it tended not to take the same form, it tended to be on other chains because we were also on the front lines of figuring out what you could do with Bitcoin without changing it fundamentally. And it turns out that people were not ready to do stuff on Bitcoin yet. My hope is that in the future they will be.

53:33Vlad CosteaWhat makes you think that Counterparty in 2025 might still get traction and become a popular use case? And how is it going to be different from 2014 when we had these OP_RETURN wars where Bitcoin Core developers were limiting the amount of data that can be put into blocks?

53:54Adam KrellensteinThe biggest difference is that the power balance on the Bitcoin blockchain has shifted significantly. In 2014, the Core developers had all of the power and miners had very little power. The miners just did what the Core developers said. And now, because there's a lot of value associated with, for instance, Ordinals and accepting Ordinals transactions and receiving Ordinals fees, the Bitcoin Core developers can scream all they want about how it's terrible for the ecosystem. But on the ground, the miners are like, no, this is great for the ecosystem.

54:24I'm getting all these fees. It's increasing adoption, et cetera, et cetera. So the power has shifted, and it's shifted from an unhealthy centralization to a healthy decentralization. We've realized the original vision of Satoshi, that the miners are the ones that actually have the power to determine what occurs in the protocol, how the protocol is going to evolve. And that's why I'm frankly not super optimistic that OP_CAT and these other protocol enhancements to Bitcoin are going to go through, because I think that miners don't benefit. And the ecosystem doesn't necessarily benefit.

55:00It's sort of good from a technological perspective, it's perfectly safe. But it really does, in a sense, change how Bitcoin works in a fundamental way, in a much more fundamental way than accepting, you know, 81 bytes in an OP_RETURN. So unclear what will happen there.

55:18Vlad CosteaI've heard this story from someone. I cannot disclose the source. But he said that he spoke with someone from Counterparty, might have been you, and asked him a similar question. And the answer that he got was that we won the culture wars. And now the culture in Bitcoin is very different from what it was like in 2014. And there is much more openness to the idea of assets and tokens.

55:42Adam KrellensteinWe won the culture wars, or we want the culture wars?

55:44Vlad CosteaWe won, as in we, the users who like Counterparty and stuff.

55:54Adam KrellensteinYeah. I think that the pendulum swings. And I think that Counterparty in 2014, it won the battle around censorship. And it sort of was the spark that started a lot of innovation and development. I don't know if it won the culture wars. Yeah, I think metaprotocols and L2s have definitely won. I think that people are now doing things on Bitcoin that they otherwise were not able to do. And frankly, a lot of the credit goes to Ordinals and Casey for having blown the doors open there, for having really shifted the narrative around what people want to do with Bitcoin and what people can do with Bitcoin.

56:44And so that wasn't Counterparty per se, but architecturally, it's very similar. And there's a very interesting historical link there between the fights about including Ordinals and inscriptions in blocks and the block size wars of 2014. Counterparty showed that something was possible. And people reacted in all sorts of different ways to that, which had interesting consequences.

57:14Vlad CosteaYou mentioned Ordinals a few times. And I want to point out that for something which I issued as both a Counterparty asset and an Ordinal inscription, I'm going to put this on the screen. I hope you can watch it, too. I was able to change the description, which basically is ORD and followed by the string that describes the ordinal. And what this did basically was to take the picture from the blockchain because I inscribed the JPEG, right? And right now, I'm certain that there's going to be permanence to this.

57:51I'm not relying on Imgur anymore for this Vlad head, which is my creation. I have this collection of Bitcoin heads. You can find them at BTCheads.com. And I think I should also turn you into a Bitcoin head. You should be part of history. There's MikeInSpace. There's, who else that you might know, MadBitcoins, Theo Goodman. You should be part of this.

58:17Adam KrellensteinThank you. Yeah, sure. Happy to.

58:19Vlad CosteaBut it's also interesting to me that there is this way for you to change the description of your assets in a way that enables you to use the image from Ordinal inscriptions for your Counterparty assets. There is this synergy between the two protocols, and I think it's beautiful. When did this happen? Because I don't remember. I think when Ordinals started happening, there was sort of a rivalry between the two protocols. But now it seems like there's more collaboration.

58:50Adam KrellensteinI've always been very in favor of collaboration, especially within the Bitcoin space and across L2s. I mean, you've been able to update descriptions for a long time from day one, I think. So that's perfectly possible.

59:07Vlad CosteaI've also seen that Rodarmor, what's his first name? Casey. On his podcast recently, he started talking very positively about Counterparty.

59:19Adam KrellensteinYeah, that was nice to see. I thought it was a very good discussion.

59:24Vlad CosteaIt's almost like he's paying respects to the protocol, but it might also mean that he might be interested to collaborate and build for Counterparty. Have you discussed with him something along the lines of building something together?

59:40Adam KrellensteinI haven't, no. I think that's, as I said before, I have a great deal of respect for him for the work that he's done. I think that Ordinals is really like a very powerful thing, and I think it's been very good for the Bitcoin space overall. No, we haven't spoken. I think we have pretty different visions about what to build in the future, but I'm not sure. Exactly.

1:00:05Vlad CosteaWhen he launched the Runes, which are basically a way for inscriptions to basically be divided into multiple tokens, he used the same OP_RETURN that was used for Counterparty, and I always wondered what's really the difference between the two.

1:00:22Adam KrellensteinRunes is much simpler. It's just much simpler. That's sort of the thing. Yeah, I mean Counterparty is account-based as well, and there's a lot of similarity there, but Counterparty is a much more complicated and sophisticated system, frankly, for better and for worse.

1:00:46Vlad CosteaWhen I send a Counterparty transaction, for example, for issuing a token, I see that it's not just OP_RETURN. It's a multisig, and there are multiple amounts of Bitcoin going to different addresses, and I've always wondered what's happening there.

1:01:03Adam KrellensteinYeah, there are multiple ways of encoding data in the Bitcoin transaction, in Bitcoin blockchain using Counterparty, and it's changed a bit over the years. If it's a small amount of data, if it's less than 80 bytes, then you just put it in an OP_RETURN, and it's cheap and easy. And then when we wanted to put more data, in a transaction, then historically, we use multisig outputs, which are expensive and not very elegant. You can actually encode data in the signatures and store large amounts of data in Bitcoin that way.

1:01:43That is obsolete tech. We developed it in 2014, and it was never upgraded. Even after the Bitcoin protocol changed to make it much easier to store large amounts of data, in a Bitcoin transaction, and it's really confirming the obsolescence of multisig outputs. That's another thing that we're working on for the upcoming protocol change for Counterparty, which is to allow for inscription-like encoding of data in Bitcoin transactions, so you can store much more data and more cheaply, and multisig encoding is going to be, it's just, I don't think it'll be used anymore because it'll be strictly more expensive, but it does the same thing.

1:02:29Vlad CosteaThis was going to be my follow-up question, if there's going to be a point in the future where you can actually put the JPEG or the MP3 file directly as part of the transaction that issues the token, and also is it possible, because I've always seen this as sort of an inconvenience, when you create a token, you create it first and then you have to make another transaction for the purpose of locking the supply. Do you think it's possible to do it all in one transaction and from the beginning say the supply is locked?

1:03:06Adam KrellensteinYes, possible. Yeah, all of these things are possible. These are the kinds of things that we need to implement in Counterparty to make it more usable and friendly and powerful.

1:03:20But yeah, you can already store a lot of data in a Counterparty transaction, it's just very expensive, with the upcoming protocol change, it's going to get much cheaper and you'll be able to store even more.

1:03:31Vlad CosteaYou suggested like 30 minutes ago that there's some sort of political struggle within the Counterparty community and J-Dog created the nomenclature for the Counterparty Classic and the 2.0 version. Doesn't J-Dog also maintain FreeWallet, which is the most popular wallet out there?

1:03:31Adam KrellensteinYeah, he does.

1:03:31Vlad CosteaIs FreeWallet on Counterparty Classic or how does it work?

1:04:02Adam KrellensteinThere is no Counterparty Classic, it's just an old version of Counterparty. FreeWallet supports that old version of Counterparty and it supports the latest version of Counterparty, as far as I know. There really isn't much of a division, right? Like there's J-Dog and then like maybe a couple people on Telegram that like, you know, like him or something like that or hate me, that, you know, are sort of angry about everything. But like the whole ecosystem beyond that is pretty clear and of one mind, like they just support the latest version of Counterparty, of course.

1:04:32There isn't really like an ongoing debate. There's just J-Dog who, yeah, maintains the most popular wallet and TokenScan, which is probably still the most popular block explorer for Counterparty, and he's, you know, screaming and ranting about, you know, how I'm ruining everything and everyone's ruining everything and so on and so forth and you can either, you know, be involved or you can ignore it, which is, I think, the healthy option. And frankly, there have been a lot of good new explorers and wallets and things coming out, so people will have an alternative to FreeWallet and TokenScan.

1:05:09Vlad CosteaYeah, that was going to be my follow-up question because if these services rely on the work of someone who is not necessarily friendly with new developments, you're going to need to build new wallets and explorers and everything else.

1:05:25Adam KrellensteinYeah, yeah, so personally, I've been working on a free and open source wallet called Horizon Wallet, which is, yeah, I think like a, you know, becoming a full-featured alternative to FreeWallet. It's a web wallet right now. It will be a desktop wallet. It will be a mobile wallet soon. But right now, it's just a web wallet and an extension. And it integrates with a number of explorers that are out there. Another one that's, yeah, and you can see the full list of all of the alternatives to FreeWallet and TokenScan on the Counterparty website.

1:06:03Everyone can see there exactly what's available. Yeah, it was a bad situation where everyone was dependent upon J-Dog's projects to do anything on Counterparty for a long time. And there have been growing pains for the ecosystem as it's been, you know, maturing, as it's been decentralizing again from that vertically integrated centralized thing. And these things take time because, you know, wallets are sticky, right? Everyone's just going to, you know, keep using the same thing because they're used to doing it. That's where their tokens are. But you can import your tokens or you can import your passphrase into other wallets.

1:06:41You can use other explorers out there that are better and more modern. And people should, you know, I think explore those options, especially because they're not, like, if nothing else, because they're not developed by someone who's actively attacking the network. Again, like, yeah, unfortunate.

1:06:59Vlad CosteaI mentioned earlier that I would be interested to put you on one of these Bitcoin head cards, basically immortalize your head in one of these cards. Yours would be number 23. And I'm going to read you the information from Casey Rodarmor's card, which is number 22. And it has the following description. Ordinal Inscriptions +1 terabyte. Hell Money podcast episodes +666. The name of the card is Rodarmor. Strength: creator of Ordinal Inscriptions. Destroyer of narratives. Weakness: nobody cared who he was until he put a JPEG on the blockchain.

1:07:39Special attack: makes sats rare again. Ultimate attack: accidentally fixes the Bitcoin security budget. Actually, there's another topic that forks from this one. But I was going to ask you, what would you say is your strength, weakness, special attack, and ultimate attack?

1:07:57Adam KrellensteinYeah, that's a lot to describe off the cuff. I'm gonna have to let the community decide on that one.

1:08:05Vlad CosteaSo if anyone's listening to this, watching, let me know what I should put here for...

1:08:11Adam KrellensteinYeah, please, please feel free to give me lots of weaknesses. That's fine.

1:08:16Vlad CosteaNo, it should be only one, like the dominant one.

1:08:18Adam KrellensteinYeah, really, really, really bad and mean weakness. That's okay.

1:08:24Vlad CosteaYeah, I'm gonna make this happen. It's fun. I miss it. I haven't done this in like two or three years.

1:08:32But Counterparty is like this, right? Sometimes you do something very cool and you're having a lot of fun. And then you see that the community moves on to the new flashy thing, which happened to be Ordinal inscriptions. And I sort of forgot about it for a while, but then I saw that it's still going. So you come back to it. It's like Hotel California, right?

1:08:52Adam KrellensteinIt's still going. I mean, I think in a lot of ways the ecosystem is healthier than it has been since it first launched, perhaps. The market's down, right? And that's a total bummer. But yeah, I mean, like I've been saying, I'm in this for the long term and I think Counterparty is not going anywhere. So I'm very eager to see what comes next.

1:09:16Vlad CosteaThere's this point from the ultimate attack of Casey Rodarmor, which is accidentally fixes the Bitcoin security budget. This is an important point, right? Because currently the culture in Bitcoin encourages people to hodl, to not spend, to not make on-chain transactions. If they make any transactions at all, they should happen on second layers, like Lightning or whatever. So who's going to pay the miners? Because the miners are receiving diminishing block rewards every four years. That's 210,000 blocks, which means that someone has to make the transactions on-chain.

1:09:54And it's sort of ironic that these people who just want to trade art on the blockchain are the ones that pay much higher fees than the ones who brag about digital gold and never selling and stuff like this. And in the end, who's going to pay the miners? Because it all comes down to this.

1:10:15Adam KrellensteinI think it's a good question. Yeah, as I said, I think Ordinals is good for the ecosystem. I think that the economic model that Satoshi created is very general and very flexible. And if your transaction is more valuable, pay more fees.

1:10:28Vlad CosteaSometimes I do that because there's this distinction on block explorers where they say the fee and the effective fee. And sometimes when I send a Counterparty transaction, let's say that I set the fee at seven satoshis per vbyte, I get three satoshis per vbyte as an effective fee. And it takes much longer for it to get confirmed. So whenever I send a Counterparty transaction, I put the fee basically double what is the priority fee at that moment to be sure that it's going to get confirmed.

1:11:03And I'm not sure exactly why this is happening, maybe that this account system with my address is sort of messy and I have lots of UTXOs and it gets like that.

1:11:16Adam KrellensteinNo, that's a wallet problem. I encourage you to use a different wallet.

1:11:21Vlad CosteaWhich wallet should I use for my Counterparty transactions?

1:11:25Adam KrellensteinI mean, I personally developed Horizon Wallet, which is, again, free and open source. There's no profit associated with it. I like it and I think it's probably the most full-featured alternative to FreeWallet and it's modern and has a correct fee calculation. So I encourage you to use that. You can also see other wallets at counterparty.io that they tend to be more focused on particular ecosystems like Rare Pepe or what have you.

1:11:56Vlad CosteaI typed counterparty.com and I don't know who owns this, but they posted this meme with J-Dog riding a bicycle saying "a peaceful day in Counterparty". Then he puts a stick between the, what do you call these, the rims of his front wheel, which is BTNS. And then he falls crying saying, "damn STAMPs, spamming transactions". Oh, and that's another big one. It's STAMPs by MikeInSpace. We haven't talked about that.

1:11:56Adam KrellensteinYep.

1:11:56Vlad CosteaWhat do you think about them? Are they excessive? Because they're basically the least efficient way of storing data on the Bitcoin blockchain.

1:12:39Adam KrellensteinYeah. What do I think about that? I overall like the project. I wish that they hadn't been kicked off of Counterparty the way that they were by J-Dog. I think that that was pretty toxic. I don't like the way that they store the data on the Bitcoin blockchain. I think that I understand why they do it. I think that it's not good for, I think that that actually does sort of, bloating is a strong word. It's not a very clean or elegant way to do it. It's not being a good blockchain citizen.

1:13:11But the fact is that Bitcoin is permissionless and you get to do whatever you get to do. So I'm generally supportive of the project and I think they do a lot of cool stuff.

1:13:21Vlad CosteaRight now, I put the website on the screen. We have the wallets that are recommended. There's Casa Tookan. I've never heard of this one. An official wallet for the Spells of Genesis game. Okay, that explains why. Even though I have a couple of cards. There's the Horizon Wallet, which you said you're developing. There's Rare Pepe Wallet, which I tried a couple of times. But it was sort of unmaintained and that's why I switched to FreeWallet. And I see that you put a disclaimer here that this provider supports a fork of Counterparty.

1:13:55Using the service could lead to loss of funds.

1:13:55Adam KrellensteinYeah, that's correct.

1:13:55Vlad CosteaAnd for explorers, you have Horizon Explorer, which I guess you also built. Memepool. I've heard about this one. XCP.io. And there's also TokenScan, which I don't understand why it's not XChain anymore. That used to be the one.

1:14:19Adam KrellensteinYeah, you know, you're going to have to ask J-Dog about his grand plans to buy his own company and sell his own company and create all sorts of new brands. He's sort of done with Counterparty and so he wants to do other stuff. And he's rebranding because of that, but not my thing to comment on.

1:14:39Vlad CosteaWhen you decided to come back to the project, what was the community reception? Because I guess J-Dog has been like the guy for a number of years and it was also Joe Looney and a bunch of others. And you just emerged after how long has it been? Eight years or nine? And said, OK, I'm going to maintain this. And what was the community like?

1:15:03Adam KrellensteinEveryone was really excited. At the time, J-Dog was in the process of forking the network again or for the first time or whatever. He was actually attacking the network. It wasn't really a proper fork either time. He just decided that he didn't like the way that the fee system worked and he was angry about how people were using Counterparty. And so he just decided to attack the network. And so people were really eager to have that not happen. They really wanted, I don't know, stability and a healthy ecosystem.

1:15:46And again, Counterparty had not been actively maintained by J-Dog or by anyone else. And so, yeah, the perception was very good. People were very excited about all of the good ways of improving Counterparty. And I think that a lot of that enthusiasm has persisted. And I'm working with Joe on a regular basis. He's great. Everyone's pretty happy and collaborative in this space, except for J-Dog. And it's unfortunate that he had so much power of the community for so much time and that he has that brand and these assets.

1:16:26Vlad CosteaI remember, I think it was in 2017, that Pepe Cash was so big. It was one of the top 100 projects on CoinMarketCap. I guess it was much higher than that, but it was such a big deal. Just this Pepe Cash that was used for trading Rare Pepes. But in the description, it said that it's for sports cars and luxurious houses or something like that. I got to look it up, but it was so funny.

1:16:58Do you remember that? Or were you around at the time?

1:17:01Adam KrellensteinI wasn't around so much. But yeah, Pepe Cash is one of the most liquid assets on Counterparty. People trade it, I think, more than almost anything else besides XCP. And it's interesting that it didn't, in the common knowledge, didn't get the mind share that Pepe tokens on Ethereum did, even though it's really the first Pepe coin. And yeah, I think that will probably change at some point in the future.

1:17:37Vlad CosteaIt says right here that Pepe Cash card is useful for buying houses, fast cars, and yachts. And there's this picture of Pepe with three Lambos in the background. I guess it's two Lambos and a Ferrari and a very large mansion. Fun times. I gotta ask you, what's like the fun or bullish narrative for Counterparty right now? Who's still building on it? Who's still issuing tokens?

1:18:06Adam KrellensteinI mean, volumes are down a lot. I mean, the exciting thing, I think, is what people are building behind the scenes on the infrastructure side. I personally am working on the wallet and the Horizon Market. Atomics are very exciting. They had a ton of usage when they first came out, but not a lot of usage since then. People are still figuring it out. And there's a lot more that can be built on Counterparty if the community wants it. We can put AMMs and liquidity pools on Counterparty.

1:18:38We can have all sorts of fun, exciting stuff. In the short term, transactions are going to get much cheaper, and that's a very important thing. Fees have been unreasonably high for a long time because of the bad encoding methods and the tech debt in the system. So that's what's coming up immediately.

1:19:00Vlad CosteaYeah, I gotta say it's pretty exciting. I want to ask you about the roadmap, but before that, let me plug a couple more sponsors. So, Noones.com is this peer-to-peer marketplace where you can actually sell gift cards or other types of assets that you might have to a lot of people online. More than 200 countries are supported. There are 169 peer-to-peer market offers right now and thousands of users and a lot of liquidity. So if you want to basically take part in this economy and sell your gift cards for Bitcoin or other coins, you can sign up to Noones.

1:19:38They also have this Visa card, so if you want to spend your coins instead of selling them to an exchange, you can actually get the Noones card. Also, they have an ambassador program and a lot of cool stuff, so check them out. They also have a spot market, by the way. So if you're not into peer-to-peer and you like to trade on an exchange, they have that, too. It's very popular in Nigeria and what CEO Ray Youssef describes as the Global South. And you can check it out on Noones.com.

1:20:11And last but not least, there is Hodling.ch, which is a service from Switzerland that helps you with your self-custody. So if you have a lot of Bitcoin and have no idea how to manage it or you're part of a company that's about to buy Bitcoin and have no idea how to set up a multisig or how to manage it, you can reach out to these guys and they're gonna give you their expertise and also give you the benefit of a Swiss service that has more privacy than something that's based in the European Union or the US.

1:20:45So check them out. It's Hodling.ch. And if you lose your keys, they also have this recovery service, which is not guaranteed to work, but they can at least try to recover your coins. Of course, there's a fee involved. So is there any development roadmap right now or what would you say is next over the next year for Counterparty?

1:21:09Adam KrellensteinYeah, there's a public roadmap on GitHub. All of the developments and all of the planning happens in full transparency on GitHub. And you can see a couple of protocol changes. There's one we're working on right now. Yeah, there are a number of major milestones for improving the command line interface so we can bring back the CLI wallet for Counterparty, which would be a big deal. It's been broken for, I don't know, half a decade at least. Improve the database structure, performance, improve the API, all sorts of things.

1:21:45Beyond that, and I'm eager to hear from people what the priority should be. There hasn't been enough engagement on GitHub and these milestones in terms of what people actually want to implement there. Because you can do a lot with Counterparty, but also people are reticent to change it. It's been the way it's been for a long time and they want it to be better and work, but now that the node software and the protocol are in much better shape than they were, they're in pretty good shape. A lot of what needs to be built is the tooling.

1:22:25The wallets have to get better. The explorers have to get better. People want exchange support. That's an important centralized exchange support because there's just more liquidity. And they want marketing and communications and social media and all of these kinds of things, which is also a perfectly valid request.

1:22:44Vlad CosteaYeah, that would be actually cool. I'm looking at the GitHub right now and I see that the repos are actually maintained, which is pretty nice. And I looked at the documentation. It seems like it focuses on how to run a node and it's been updated, which I appreciate.

1:23:02Adam KrellensteinIt's been all updated and fixed. There's updated dynamic and programmatic API documentation. Yeah, we want people to be able to build on Counterparty and it's getting there.

1:23:17Vlad CosteaWhat would you say is a use case or something that you can do with Counterparty that is very cool but at the same time it flies under the radar and it's so underrated that you want to mention it?

1:23:30Adam KrellensteinOh my god, there's so many different things. The alternatives are so limited. You can't do anything. You can create a token, you can move it. But in all sorts of ways, like locking dividends, the DEX itself is not used enough. Yeah, there's so many, so many different things that you can do. And the new fair minting feature that we released is very exciting because it's a much more powerful, flexible system than anything that's out there, at least in the Bitcoin ecosystem. And so I encourage people to develop on that as well.

1:24:09Vlad CosteaI know that Tether USDT first launched on the Omni Layer, which used to be called Mastercoin. Do you believe that it can come to Counterparty and if not, is there any plan for some sort of stablecoin, decentralized or otherwise?

1:24:25Adam KrellensteinI don't have any plans for a stablecoin. I think it'd be great. It's totally possible.

1:24:31Vlad CosteaYou think it would be like, what's the one on Ethereum that's supposed to be decentralized? Do you know what I'm talking about?

1:24:42Adam KrellensteinYeah, there are a lot of them. I don't, yeah.

1:24:45Vlad CosteaSo I see that you're a bit rushed, but how would this stablecoin look? Would it have a central issuer or do you think it can be done using the Counterparty functionalities in a way that's decentralized?

1:24:59Adam KrellensteinYeah, I mean, I think if for all the, all the stablecoins have a centralized issuer, as far as I know, or they're built on a house of cards, those are the two options generally. But I don't have any particular plans for that. If someone knows how they want to do it, let me know.

1:25:21Vlad CosteaIf Bitcoin adds base layer privacy with confidential transactions or something similar, you think that's the end of Counterparty because you can no longer see what's being transacted and what's being issued?

1:25:34Adam KrellensteinNo, no, no. I mean, Bitcoin is very, very unlikely to change in such a way that would make Counterparty not viable. That's not going to happen.

1:25:44Vlad CosteaBut hypothetically, if you have that, can you still operate and have the same markets?

1:25:51Adam KrellensteinYeah, I can't imagine what such a change would look like that would be a problem. Yeah, I know of no proposal on the table that would be a problem for Counterparty. There are a lot of different ways of implementing privacy. Like everyone, if the whole Bitcoin protocol changed and it only used confidential transactions, there's still ways of embedding that data in Bitcoin transactions that you'd be able to use for Counterparty. It's not going to happen.

1:26:19Vlad CosteaOkay, how can you kill Counterparty?

1:26:22Adam KrellensteinYou can't. Isn't that great?

1:26:25Vlad CosteaYeah, it upsets some people, but I guess it's all the right people.

1:26:30Adam KrellensteinYeah, I think so.

1:26:32Vlad CosteaCan you do prediction markets on Counterparty?

1:26:35Adam KrellensteinYep. In 2014, you could do it.

1:26:38Vlad CosteaWhat changed?

1:26:41Adam KrellensteinNothing really changed. People just didn't use it a ton. It didn't have a lot of wallet support. People haven't done any bets on Counterparty in a long time. I think it's just ecosystem support and communication, but it's perfectly possible.

1:26:58Vlad CosteaOkay, Adam, I see you're a bit in a hurry with your answers, and I don't want to hold you any longer. It's been one hour and 30 minutes. It's been enough torture. How can people follow you and keep up with the latest developments?

1:27:14Adam KrellensteinYeah, I mean, Telegram is always good. There's a Counterparty channel at Counterparty General. There's the Counterparty official Twitter account.

1:27:24Yeah, that's my personal Twitter account, agkrellenstein. There's my Twitter handle at T-E-Y-S-O-L. There's the Counterparty website. There's the Counterparty mailing list, all of the above.

1:27:42Vlad CosteaYeah, and for everyone listening, there's still the airdrop that is taking place for the first 10 people who paste their Counterparty addresses, and you get one too, Adam. Don't worry, even if you don't post it in the chat. You can get it, DAVIDPEPEBTC, which you can find today on any explorer. It was drawn by my girlfriend, and I think it's pretty nice art. That's a nice reward for you because you listen to this, and you care about this, and you care about Counterparty in general. One last question, though.

1:28:15Do you remember Chris DeRose? I think he was the marketing guy for Counterparty.

1:28:21Adam KrellensteinYeah, unofficially, yeah. He was a very vocal proponent of Counterparty way back in the day. He was great for Counterparty.

1:28:29Vlad CosteaYeah, I'm gonna send this to him because I guess he's excited.

1:28:36He's traveling a lot. He's traveling in South America, and he's looking for the meaning of life, and I did an interview with him last year. You can check that out if you want.

1:28:36Adam KrellensteinCool, yeah, definitely. Would love to reconnect.

1:28:36Vlad CosteaThank you very much, Adam, and I wish you best of luck with Counterparty.

1:28:36Adam KrellensteinThank you.