Counterparty (XCP) was founded by Robby Dermody, Evan Wagner and Adam Krellenstein in 2014, predating the popularity of ICOs. At that time, participants sent Bitcoin to an address to be burned (Proof of Burn) - a process which removes it from all future transactions. In essence, Counterparty extends Bitcoin, by enabling smart contracts as well as providing access to the Lightning Network.
Counterparty creates assets which are Bitcoin aware – i.e. it integrates directly with Bitcoin. These in turn, allow users to create and trade these assets on top of Bitcoin's block chain. Counterparty implementations include industry players from gaming (e.g BitCrystals) to decentralised stock market projects (Overstock’s Medici project
Although Counterparty has faded from public attention, it is still active under active development, enabling smart contracts through side chains – XCP can be used to create new tokens, rewards, and even new currencies. With the Pay-to-script-hash (P2SH) protocol, Counterparty makes payment channels possible and enable its use in the over the counter (OTC) markets and dark pools.