What is a Vending Machine?

What is a Vending Machine?

How do vending machines work with Counterparty? Why does one want a vending machine, and what problem do they solve? In this video, from the heart of the ...


What's up, party people? Chris DeRose here, Community Director of the Counterparty Foundation, and I've been asked a question here a number of times. I'd like to kind of clarify. What is a vending machine? What is it? How does it work? Why do you want to use one? So lets talk about this. Vending machines are kind of new. They're a neat feature. They're not intrinsically supported by Counterparty and typically there are third party tools that facilitate vending machine functions. is one of the stereotypical examples of this functionality. But what a vending machine is, is a mechanism, a software package whereby users can purchase an asset for a fixed denomination. That fixed denomination can be either another asset, it could be Bitcoin, it could be the US dollar by way of Bitcoin, or even conceivably US dollar by way of credit card. But what you might do, for example, is define a token. Let's say a t-shirt that you want to sell.

Let's say you define this asset of t-shirt in the Counterparty system and you just say, 'All t-shirts are $25.' You can set up a vending machine to sell t-shirts for $25, either in US dollars or in Bitcoin. When that amount is by your vending machine, it will then issue that t-shirt asset to the person who spent it. It'll issue it directly to the spending address where the money came from. The user who has bought that token can now facilitate a transaction with that token elsewhere. So if it's for your t-shirt, maybe he would hold that token, maybe he would trade it with others or maybe he would spend that token immediately.

There's all kinds of different uses for these and I anticipate them being very useful for smart contracts. Certainly, one very good example is the XBTC token. The XBTC is approximately or exactly one BTC. It begs the question why would you want to buy an XBTC by way of a vending machine. The easy answer is that an XBTC is a Counterparty asset whose price is fixed to the BTC. That lets you escrow Bitcoins in the same way that you would want to in any other sense, but you do it with Bitcoins directly.

Because there is a vending machine that is facilitating that transaction, that vending machine has locked the price for you and it becomes a stable store value that you can trade and speculate on or more specifically in the case of XBTC, you can create contracts with. So those are the overviews of what vending machines are and certainly I would have you check out for more information on vending machines, and sort of consider what they could do for you and your application. Typically, it's very useful to anchor the price of something in a very specific term, and to sell for your own profit the asset that you've created. That's it, very simple concept. As usual, you can email me your questions, chris@chrisderose.

com, or tweet them to me at DerRseTech on Twitter. Subscribe to my channel if you like this video and keep on watching.