Explanation of Concepts (BTC/XCP/Digital Asset/Wallet)

In this blog, we'll walk through purchasing your first Counterparty asset on the most basic level. I include resources that through my experience I'm able to personally recommend, although there are most often other adequate options if you have specific preferences (especially in the "Purchasing Bitcoin" section). 

 that will be touched on during this process: 

 For all intents and purposes, Bitcoin is the unit of account and medium of exchange for all digital assets hosted on the Bitcoin blockchain (Counterparty assets). You'll need to own Bitcoin in order to purchase any of these assets.

, XCP is the native token of Counterparty. It is a technical necessity for adding advanced features to Counterparty, which by nature require a protocol aware currency. Bitcoin can only be aware of BTC, while Counterparty can be aware of both BTC and XCP itself. This makes it possible to escrow funds, trade in a decentralized manner, and harness the full potential of programmable money. Traditionally, Bitcoin NFTs are hosted on Counterparty.

 Also known as NFTs, this is a term used to describe the token that contain the art/image/subject you're interested in purchasing and owning.

In order to store and access your digital assets, you need a "wallet." We'll introduce 

 later on as the community-standard, but high-level you'll desire a wallet that supports Bitcoin and Counterparty assets.

With an understanding of the concepts, the following 

 be easier to digest. Here, I discuss what is required to acquire your first Bitcoin NFT and ways in which you can go about it.

 Can be done on any of the following (amongst others)

: Recommendation for Dollar-Cost-Averaging

Avoid if looking to purchase with sole intention of using to bid as Swan's withdrawal date is the most delayed 

Access data regarding distribution, burns, and historic sales data

Access Dispensers ("vending machines" for digital assets)

In summary, what you'll need for purchasing your Bitcoin NFT on Scarce City:

 to use for bidding/purchasing on Scarce City

 that can be anonymous (for auctions only)

that contains your "Counterparty NFT Address"

Setting Up: What to Do Before Owning Your 1st Digital Asset

While it's fun to window shop Counterparty assets, it's a lot more fun to do it while being prepared to purchase the ones you want to collect. The below checklist can be used to assist with that. 

Necessities for purchasing your first Counterparty asset (or "Bitcoin NFT") on Scarce City:

 that contains your "Counterparty NFT Address" to send the digital asset to

With all of the above, you're able to begin to bid and purchase physical and digital goods on 

. Below, we discuss this preparation step-by-step.

 is available as a desktop and mobile version. Our recommendation is to operate off of the desktop version if possible at it's a more seamless experience. We'll cover the installation and setup of both below.

Follow the instructions to download the appropriate software package. Once installed, you'll be prompted with the following.

Assuming you're new to the space, select "Create New Wallet." You'll then be walked through the process of writing down your private key, which is NOT to be shared with anyone. Keep the list of words safe. Feel free to note in a password manager (given it's already a hot private key - meaning generated from an application connected to the internet - password managers are okay) or on a piece of paper kept in a secure location.

Note: If you're new to the concept of a private key, these set of words are a master key to unlocking your wallet. Making this list of words public is analogous to handing over your banking login information to a stranger. Except instead of taking your cash, they'll be taking posession of your nft's.

Once your private key is writted down and secured, you can progress to the main screen.

Please note that the toolbar has been updated to include an "address" tab as seen below:

The final step in FreeWallet to securing your first Bitcoin NFT is to "View Address." This will present you with your public address in the form of a QR code and text. When requested for your "Counterparty NFT Address" when purchasing on Scarce.city, this is the text you will be providing as it is instruction to the seller of where to send the NFT.

Access your phone's app store and search for FreeWallet. You will want to look for the app that has the following logo.

Once locating and installing, you'll enter the app and proceed with the following. See the above section "FreeWallet: Desktop Walkthrough" for instructions on noting down your private key.

Buying Your 1st Counterparty (XCP) Asset

NFTs are rightfully a controversial topic in Bitcoin. If we're being real, the space is a speculative circus of jpeg trading that mostly relies on a zero-day, arguably centralized protocol. Many current projects will trend to worthlessness over time. 

However, in our view, the concept of NFTs is here to stay and will likely flourish to become an important building block of the next phase of the internet, (cringe alert) the metaverse. No one know what this pie-in-the-sky digital world will look like but whatever the form, digital asset ownership will be essential.

What we do know is where the concept started. Before the pixelated avatar frenzy, there was a grass roots project that was just as heavy on security as soul. The term "NFT" wasn't used in the days of its creation. These blockchain tethered jpegs and gifs were simply called rare pepes.

What makes rare pepes special? For one, they're secured by the strongest network the world has ever known. Rare pepe metadata is recorded in the OP_RETURN field of a Bitcoin transactions.

What's more, rare pepes embody the strongest meme of the digital age, Pepe the Frog. Pepe circulated MySpace profiles before being co-opted by celebrities, the Alt-Right, and the Free Hong Kong movement. Pepe is not good or bad. Pepe is the perfect meme because it can symbolize anything to anybody.

The Rare Pepe project has been subject to almost as much controversy as its protagonist. It's withstood assaults from all imaginable sides: the PC police, block space purists, and even the creator of Pepe the Frog himself. It's a rare NFT breed (pun intended) that actually benefits from the uncensorable nature of blockchains as it would have almost certainly been cancelled otherwise.

Finally, and perhaps most importantly, select rare pepes achieve the greatest heights of culture, beauty, and comedy.

Rare peps are punk rock, digital poetry, and everything between.

We've been a proud supporter of rare pepes since 

 in April 2021 and have since auctioned two pepe collections, most recently in 

We plan to continue to auction rare pepes for select occasions but sometimes pepes are best traded at a fixed price. The seller may only be willing to sell at a specific price and the buyer may want to buy immediately.

that we plan to add to our fixed price marketplace, such as original art, prints, clothing, etc. Pepes are the ideal seed given their standardized data and ease of transfer.

The pristine collateral of Bitcoin combined with the cheap, instant, anonymous transactions of Lightning have enabled our auctions to keep bidders accountable with minimal friction.

We plan to use these same properties to keep sellers accountable in our marketplace. Instead of exposing themselves to the cost and risk of giving up custody of their pepes, they simply pay a small deposit that is refunded once their pepe is sold or they cancel their listing. If they fail to transfer their sold pepe, they lose their deposit and a portion of it is sent to the would-be buyer to compensate them for the failed transaction trouble.

It's trust and friction minimized value transfer made possible by the Bitcoin stack.

We have a roadmap full of improvements to make it easy to browse and buy pepes as well as list them. But we got dank and rare pepes for sale now for those feeling froggy 

Scarce City's Rare Pepe Marketplace 🐸

Mr. T is a pretty tough guy but even he sheds a tear when his favorite Bitcoin artist sells their work for Ethereum.

Mr. T isn’t a maximalist; he’s just a man of principle. Bitcoin art should be sold according to Bitcoin principles. I’m talking trust-minimized pseudonymous transactions denominated in Bitcoin 

 know something about principle. The Old Guard has been auctioning fine Bitcoin collectibles for Bitcoin on the web 1.0 forum since the Satoshi days.

It works pretty well for Casascius coins and other ancient Bitcoin artifacts. But we think it’s fair to say that an upgrade that remains true to Bitcoin principles could attract much deserved attention to other 



A challenge of any auction is keeping bidders accountable for paying their bids. Reputation is one approach to solving the problem but if bad actors aren’t giving up their personal information, they can easily create new accounts to continue well...acting bad.

Another is fully collateralized bids held in escrow until the auction is complete but collateral payments on Bitcoin get rekt by onchain fees, even for bids that are ultimately outbid.



With Scarce City's Lightning Auctions, bidders can (under)collateralize their bids with minimal fee lightning payments. If the winning bidder does not pay up, they lose their collateral and the next highest bidder is crowned the auction victor. Otherwise, all bidders receive their collateral back at the end of the auction, without paying onchain fees.

Here's how we've brought Lightning Auctions to life at Scarce City (

Other Ways Scarce City Makes Auctions Better



In addition to solving auction accountability with minimal cost, we can potentially make art more valuable while saving artists and buyers major headaches:


: Art sold through Scarce City Lightning Auctions is NFC equipped with certificates of authenticity that prove authenticity, ownership, and transaction values on Bitcoin.

: Once an auction is complete, the work is open to offers from other prospective buyers. If the new owner accepts an offer, we coordinate logistics, keep the certificate of authenticity intact, and break off a piece of the proceeds for the original artist so that all parties get the most out of the artwork.

: We hold winning payments until the item ships to its new owner. The artist gets paid when tracking is verified. 

: And what if the item is damaged in transit or doesn’t show up at all? Since we work with artists to make sure the art is safely packed, we’re happy to take on the meat-space risk.

In sum, Bitcoin auctions just got a whole lot better for everyone.


We think that’s something Mr. T can get down with.


Lightning Auctions will debut soon with a very special work of Bitcoin art. Sign up for our mailing list to be the first to know 👇

Introducing Lightning Auctions

 we explained what the Lightning Network is, the micropayment commerce it makes possible, and how wallets are bringing down the costs for people to use the network. 

 set the stage, the Network's progress gives line of sight on a future in which Average Joe may choose to buy his cup of coffee with Sats instead of Benjamins.

Sats-Benjamins Analysis: Buying a cup of coffee

As exciting as bitcoin-purchased coffee is, it's a drop in Lightning's ocean of potential.

What could possibly be better than coffee? 

There's only one thing: The Internet. And I'm not talking about our current 

watch a cat video and be bombarded with cat food ads

 internet. I'm talking about the internet we were promised: John Perry Barlow's Internet.

"Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather."

A Declaration of the Independence of Cyberspace

A Toolkit for Heretical Web3 Developers (for dummies)

The concept of a new Lightning-based internet can get pretty heavy so I'm going to lean on people way smarter than me to guide you through it. Specifically, 

Lightning 2020: A Toolkit for Heretical Web3 Developers

I'm sure there's other great Lightning-as-the-new-internet content out there but Ryan's piece has been my map of this exciting new world. I can’t improve it. The best I can do is make it understandable to a broader audience.

Ryan identifies that along with easy microtransactions, the Lightning Network adds two new levels of programmability.

Persistent, self-sovereign identity and authentication, which are made possible by macaroons, Lightning Service Authentication Tokens (LSATs), and generic digital bearer asset tokens

Arbitrary data payloads, which are made possible by Type-Length-Values (TLVs), Keysend, and HORNET

We're going to break these down in the simplest terms and best memes possible.

Lightning payments are sent from the sender's node to the recipient's node, through a network of routing nodes. 

Think of a node as a computer running Lightning software. These computers can connect to form channels that Lightning payments flow through.

 visual of nodes A through Q, the channels between the nodes, and how a payment could flow from node A to node Q.

Like Bitcoin wallets, Lightning nodes are identified by encrypted keys which look like a random sequence of numbers. Unlike Bitcoin wallets, nodes run software that stays online and are meant to send and receive all of a user’s Lightning transactions. Nodes used by user friendly Lightning wallets are an exception that we'll get into.

These characteristics make it possible for node data to be collected and displayed while the node's owner remains anonymous (we call that 

 list Lightning nodes along with their activity (how old they are, their channels, etc.). It's kind of like a social network of Lightning nodes where each node has a profile page that shows the node's influence in the Lightning Network. 

The point is nodes can act as digital identities, kinda like website usernames, except better in a couple ways.

: This dead horse is worth beating. Personal information is not tied to nodes. This means if you login to a website with your node instead of an email address, the site can't target you with creepy personalized ads or lose your personal info to hackers.

: Remember, nodes are designed to send, receive, and route payments so a node used as a login can easily transact bitcoin with a website. And since Lightning is designed for programmable micropayments, this ability goes beyond anything we've seen in traditional commerce. Imagine paying for the exact amount of time you spend watching a cat video instead of commiting to a monthly cat video subscription. This also opens the door to the entirely new possibility of websites being able to send money directly to a user’s ID👀

If you're like me, you're probably wondering what using a node as a digital identity looks like. 

, gives us a glimpse of this future potential reality.

Y'alls is a message board that runs on Lightning. Users pay sats (Bitcoin's smallest unit) to publish an article and they have the option to charge readers sats for article access. The setup isn't seamless in the current state but with recent 

 developments, users will soon be able to receive these payments directly to their node by submitting their Lightning node public key with their article.

Pseudonymous logins that can send and receive payments are cool but we're still in the shallow end of the Lightning Web3 pool. Put on your water wings because we're going to dive into the other digital things that can be sent among Lightning nodes.

Authentication made possible by macaroons, Lightning Service Authentication Tokens (LSATs), and generic digital bearer asset tokens

What in the hell is this supposed to mean?

Think of it as different types of digital receipts that prove you paid for a website's service with the click of a button. It's kinda like the "Sign in with Google" button that lets you magically enter a website.

Except digital Lightning receipts (aka LSATs) magically let you enter websites you've previously sent a Lightning payment to (even if it's just a few sats). And unlike big bro Google, LSATs don't track you around the internet trying to guess the next useless thing you can be manipulated into buying.

LSATs can be sent to other nodes just like payments, meaning you can transfer your right to access a website to a friend or an unknown internet stranger that pays you for the privilege. It's like sharing your Netflix password except LEGIT.

LSAT potential isn't limited to a proof of payment. 

 shakes the imagination with his exploration of how LSATs could be used as a form of 

. A COVID testing center could issue test results in LSAT form which could prove to retailers, TSA, etc. that the patient tested negative for COVID at a certain time and date without the need of unsettling surveillance.

So we've figured out that digital receipts can be transferred between Lightning nodes, along with payments. At this point, a woke observer would realize that we're just sending data between nodes. A bespoke observer would realize that theoretically, any type of data can be sent between nodes. 

Arbitrary data payloads, made possible by Type-Length-Values (TLVs), Keysend, and HORNET

Lightning transactions are designed to attach data to payments. Even with a standard Lightning wallet, a memo can be attached to payment. Here's me being tough with myself through a 1 sat memo-attached invoice from my 

See what I did there? I just sent a private message from one app to another for 3 sats (1 sat payment + 2 sats in fees). At current prices, I could send 30 more for the cost of a penny! And when I say "private", I don't mean in the way Zuck says his chat apps are private. 

By design, Lightning network messages are routed through nodes that don't have visibility into the sender or recipient nodes and there is no backdoor to any powers that be. I think it's fair to assume that many people would be happy to spare a few sats for that type of peace of mind.

So, how do we make most use of Lightning's private memo sending capabilities?

 gives users the benefit of Lightning's private messages and payments within the comforts of a design that feels like it has nothing to do with Bitcoin.

Lightning chat apps like Juggernaught are really ambitious. Attracting a large number of users away from entrenched centralized chat apps is a David vs. Goliath effort. But if they pull it off, huge improvements in digital communication privacy can be made for generations to come.

And there's no reason why data on Lightning has to stop with text communication. As 

Potentially you could have a streaming movie that compensates everyone that participates in the streaming movie.

, a Lightning chat app with video conferencing. Unlike your regular not-so-private-maybe-Chinese-spyware Zoom calls, Sphinx video is built for privacy. Viewers can even tip the broadcaster sats in appreciation for their viewing pleasure. Check Sphinx's not so subtle flex in this 

 expands the conceptual limits of data on Lightning even further. He explains that a network of Lightning nodes could create a better alternative to 

, the popular encrypted anonynouminity network that allows users to access the internet and software without exposing their identity. 

Like the Lightning Network, Tor also routes data among a network of nodes. But the Lightning Network is better designed in a few ways:

: It's harder for unfriendly outsiders to surviel the routes data takes through Lightning nodes

: Lightning nodes get paid to route data which means there's a reason for people to run private-data-routing-nodes other than the goodness of their cypherpunk heart. More incentivized nodes mean a lower percentage of nodes being run by unfriendly outsiders wishing to tamper with the network.

And there you have it. The potential for a network of Lightning nodes that act as pseudonymous digital identities and send private payments and data among each other. 

I think John Perry Barlow would be pleased.

How do we get from today's early stage of Lightning adoption to an independent Internet? 

Lightning protocol and app developers need to keep the upgrade and product engines pumping to onboard more users onto the Lightning train. There's one specific piece of infrastructure that all of the internet freedom goodness covered in this post depends on: users running Lightning nodes.

User friendly Lightning wallets have made it possible for non-node runners to use Lightning. This is great for Lightning adoption but these users cannot use nodes as a digital identification nor participate in any of the cool functionality that comes with it. There are several approaches in the works to lower the hurdle to become a node-running Lightning user.

: New hardware/software setups are consistently making it easier for people to run their own Lightning node. 

 is one such product that makes node-running easy enough for newbs like us.

: There's no reason why a Lightning node can't run on your mobile device, except practicality of course. The 

 is an early attempt to allow users to run their own Bitcoin node. While it 

. is working on a solution for its non-node running users to get full node benefits. 

 is a node that intermediates payments between Carol and Bob so that Carol and Bob don't have to keep their mobile wallet nodes online.

 is a new company developing a service that makes it easy to create a remote, always-on Lightning node without sacrificing control. They will allow individuals and business to create their own Lightning node in minutes. If it delivers, it could change the Lightning game.

 gives users the option to sign up for Lightning node access when they onboard onto the app. Chat apps have struggled to make money since the dawn of Web2. Sphinx may have just solved this ***without sacrificing user privacy***

If and when these services make it dead simple for Average Joe to access Lightning node capabilities, expect a new category of Lightning apps that expand the capabilities to follow. 

This virtuous cycle will not only create new ways to spend and earn money on the internet but also has potential to offer an internet that puts the privacy and preferences of users first.

And Scarce City isn't just going to sit back, post memes, and watch this future unfold. We've got wild ideas to become a Lightning-based marketplace.

Bitcoin as Money: The Internet We Were Promised

Bitcoin haters have never been hard to find. Here's what some of the best and brightest had to say about the big ฿ over the past few months:

The first wave of cryptoassets, of which Bitcoin is the best known, have so far failed to provide a reliable and attractive means of payment or store of value.

Cryptocurrencies basically have no value. They don't produce anything...It doesn't reproduce, it doesn't deliver, it can't mail you a check, and can't do anything.

I can trade bananas easier as a commodity than I can trade bitcoin. And I can still eat that banana before it goes bad, and get all my potassium for my workouts!

Haters gonna hate but they're not wrong. For everyday purchases, using Bitcoin is more trouble than it's worth. Why go through the pain of buying a coffee with bitcoin when Benjamins are so damn good for buying coffee?

They're missing something though. Bitcoin has unique properties that create new ways to use money. In a small number of cases, for a small number of people, those new ways of using money are worth the pain of using Bitcoin.

Small # of Cases for a Small # of People: Sats > Benjamins

The point is those small number of cases for those small number of people are growing. Here are the number of active Bitcoin addresses over time from 

. The increase shows that either more people are using Bitcoin, using it in more ways, or both.

Bitcoin is open-source software. That's geek-speak meaning anyone can help build it and it's made to be built into other software. What happens as more work goes into Bitcoin and Bitcoin related software? It gets easier to use and there are more ways to use it.

The world is also changing. Let's be real. It's getting weird out there. As it gets weirder, Bitcoin's unique properties could become more useful to more people.

Play these two trends out and eventually even the biggest haters will have to give the big ฿ their respect. Even if we're still using Benjamins to buy coffee!

To make this case, in this post I'll first give a rundown of what Bitcoin is, the unique properties that make it useful, and the costs of using it. If you've already been around the Bitcoin block, feel free to skim or 

In the following posts, I'll dive into the different ways Bitcoin is used and how it could be used in the future, starting with traditional commerce:

: The history of Bitcoin commerce epic fails and false hopes.

Coffee? Where we're going we don't need...coffee

 The new commerce possibilities enabled by Lightning Network micropayments.

): Lightning's potential to create the private and secure internet we were promised.

We'll then work our way into other ways Bitcoin is used as money.

Thousands have tried to answer the question but mostly in a way that doesn't make sense to normal people. Here's a straightforward approach from 

"At its core Bitcoin is a transparent ledger without a central authority."

Also, have you noticed that sometimes ฿ is capitalized other times lowercase? It's not because Bitcoiners are sloppy. 

 refers to the transparent ledger (or network/software) while 

 refers to the unit of money that is accounted for in the transparent ledger. In other words, the coins.

If these statements make your head spin, take no shame in checking out this real talk from Nik Custodio: 

For our purpose of understanding what makes Bitcoin useful, we'll focus on the properties that emerge from 

. The grouping and labeling of these properties are another topic of hot debate in the Bitcoin world (spoiler alert: Bitcoin is one big hot debate). I've adopted my list from 

in the internet. The imaginary lines that humans draw on maps and the rules that people have to follow on different sides of those lines don't matter to Bitcoin. It costs the same and takes the same amount of time to send bitcoin across the room as it does halfway around the world.

: Only 21 million bitcoins will ever exist. The amount of bitcoin created with each block decreases every 4 years in an event called "the halving". Today, 12.5 bitcoins are created with each block. After the next halving in mid-May 2020, that number will half to 6.25 bitcoins.

 and a visual of the creation of those 21 million bitcoins (we've moved a bit further along it since) from Phillip Nunn.

: Bitcoin's smallest unit of transactable value is called a Satoshi or a 

. A single Bitcoin is equal to 100 million sats. As I'm writing this, there are 142 sats in 1 US penny. The point is Bitcoin can be transacted in tiny amounts of money.

: The Bitcoin blockchain is maintained by independent computers (

), known as miners and nodes that add and verify new batches of transactions, called blocks. Once a transaction is added to a block, it can only be reversed if a large percentage of those computers agree to remove the transaction's block and every block that has been mined since. This means it is really expensive to reverse transactions (Jameson Lopp gets into the nuance here if you're interested: 

Bitcoin: The Trust Anchor in a Sea of Blockchains

). For the real world, this means you can't call your Bitcoin exchange to ask them to reverse a transaction like you would call your bank to reverse a credit card payment.

: Unlike the traditional banking system, you don't need an account to interact with Bitcoin. Anyone can run Bitcoin's software and transact bitcoin without anyone's permission. This also means that no one can stop you from using Bitcoin. In other words, Bitcoin is censorship resistant.

: Once you have bitcoin in a wallet, you just need your private key to spend it. There are a bunch of hardware and software solutions to securely store and spend bitcoin. But a Bitcoin wallet can also be accessed by simply memorizing 12 words in a certain order. Once stored on your phone, computer, USB stick, or in your head, you can take your bitcoin and access it anywhere.

: Because Bitcoin is digital, it can be programmed into software. Similar to how Uber sends a car to pick you up with the press of a button, software developers can program bitcoin transactions into their apps in any way they dream up.

: Bitcoins are stored in wallets that are associated with a seemingly random sequence of characters called an address. Anyone can create a wallet and receive bitcoin to their wallet address without giving up their identity. The simplest way to understand this is to generate a 

: All Bitcoin transaction and address activity is publicly displayed on the blockchain. Anyone can search and view blockchain activity in a 

. This transparency makes it easy to track and audit the movement of bitcoins among addresses.

As we'll see in our examples, Bitcoin is most useful when more of these unique properties are used.

The cost of using Bitcoin is all of the extra effort, cost, and risk that come with using it instead of Benjamins.

No need to be a Bitcoin OG to call those out. In a nutshell, if you want to use Bitcoin in any meaningful way you have to:

Find an exchange or person to buy bitcoin from

Send them fiat currency and receive bitcoin from them without getting ripped off or giving up sensitive personal information

Store your bitcoin without losing it or having it stolen from you while being exposed to extreme price fluctuations

Find someone who will accept it as a form of payment for some special something that you want to buy

Send them bitcoin in exchange for that special something at the risk of getting ripped off (again) and triggering a capital gains event

Pay a wildly fluctuating fee to complete the transaction

Wait 10 minutes to 2 hours, constantly refreshing screens, hoping you didn't input the wrong address

Potentially live with purchase regret if bitcoin's price increases 10x after you spend it.

These costs can be summed up in the following categories:

: The risk of losing your money from getting hacked, losing your private keys, sending bitcoin to the wrong address, bitcoin's price tanking, transaction fees, and capital gains tax.

: The time and frustration involved with researching the right hardware and software solutions to use, dealing with terrible user experiences, and waiting for transactions to complete.

: The challenge of finding people and companies to buy bitcoin from and sell bitcoin to.

: The risk of missing out on sick gains if bitcoin's price increases after you spend it.

Given the collosal hassle, it's a miracle that anyone uses Bitcoin at all. They must really love those special somethings. We'll explore the special somethings that are worth the hassle (as well as those that are not) in the following posts.