In the heated development space for Bitcoin 2.0 protocol projects (Figure 1), on November 12, 2014, Counterparty announced that they ported the open-source Ethereum programming language onto their own platform. Ethereum is regarded as one of the most advanced Bitcoin 2.0 projects, a general-purpose Turing-complete cryptocurrency platform.
Turing-complete in this sense means able to run any cryptocurrency protocol and any cryptocoin, essentially a universal crypto-platform (the platform wins, not any specific cryptocurrency). Now Counterparty can do this too, serve as a Turing-complete platform, and possibly in a better way than Ethereum since Counterparty is already running on the existing architecture, the Bitcoin blockchain (with 90% cryptocurrency market cap), the de facto standard, already-launched, worldwide, secure platform.
This is Good News for All Parties (not just Counterparty): Bitcoin 2.0 is Just Beginning
This does not mean 'game-over' for Ethereum, or 'game-won' to Counterparty. It is a sign of the dynamism in the space and the rapid innovation that open-source software communities enable (both Ethereum and Counterparty's software is all open-source). Every different project is able to examine and work with the code of the other projects and bring in any and all implementations.
It means that good ideas can take seed more rapidly, be improved through iteration, and allow space for the next good ideas. Ethereum and Counterparty both have deep visions for the whole future architecture of the blockchain, and establishing early 'plumbing' foundations can help everyone progress to the next levels. In the seething hive of Bitcoin innovation, these kinds of announcements would be expected to continue, both since the blockchain industry is in early stages of development, and especially due to the open-source code liquidity of the industry.
The great benefit is that now Counterparty may be able to quickly launch the ability to do smart contracts on their platform, since Ethereum is known for its intricate focus on smart contract functionality. Smart contracts is the capacity to do more elaborate transactions on the blockchain, moving beyond simple buy-sell currency arrangements to more sophisticated contracts such as a loan with ongoing payments and interest rate resets. However, even before the Ethereum port, Counterparty did have some degree of smart contract capability (certainly for the basic smart contracts that are not even yet widely-used), as does the Bitcoin blockchain itself, and other solutions like Colored Coins <http://coloredcoins.org/> and Coinprism <https://www.coinprism.com/>. Other Bitcoin 2.0 protocol projects such has Ripple have their own smart contract facility, Codius <https://ripple.com/codius-is-
The key point is that the blockchain industry is currently building out the infrastructure, the enabling layers in a protocol stack, the plumbing of the new layers of the Internet. There is tremendous functionality fungibility across blockchain protocols and platforms.
In the blockchain plumbing layer, it might be possible to do some degree of smart contracts and tokenized altcoin issuance and multi-sig wallets on all cryptoplatforms. The questions are therefore 1) which Bitcoin protocol 2.0 platforms will emerge as standard after the intense innovation and development phase, and 2) which platforms will prove to be the most secure and raid/theft-free, and 3) at the higher level, which will be the new value-added services (the Netscape, Amazon, and Uber of the future) built atop the Bitcoin protocol plumbing protocol layers.
The important take-away message is that the Bitcoin 2.0 protocols space may only heat up with more announcements to be expected, and more projects forming, merging, dying, and cross-implementing. Also that there could continue to be substantial volatility in the price of Bitcoin.
The Counterparty announcement should be seen as support for the overall blockchain industry and underlines the clear demand to move beyond Bitcoin 1.0 currency (even as this segment is still developing) to Bitcoin 2.0 contracts. This has always been part of the initial vision set forth by Satoshi Nakamoto:
"The [Bitcoin] design supports a tremendous variety of possible transaction types that I designed years ago. Escrow transactions, bonded contracts, third party arbitration, multi-party signature, etc. If Bitcoin catches on in a big way, these are things we’ll want to explore in the future, but they all had to be designed at the beginning to make sure they would be possible later." (Nakamoto).
Reference: Nakamoto, S. (2010). Re: Transactions and Scripts: DUP HASH160 ... EQUALVERIFY CHECKSIG. Bitcointalk.