What does it mean to “attach” an asset to a UTXO and why is it necessary to do a swap?

Counterparty is a Bitcoin metaprotocol: it lives on top of the Bitcoin blockchain and has rules that are independent from Bitcoin. Metaprotocols inherit the security of the Bitcoin network, while providing functionality not supported by the Bitcoin protocol—but for that very reason Bitcoin is not ‘aware’ of them, and so by default there is limited interoperability between Counterparty assets and BTC.

BTC balances are associated with unspent transaction outputs (”UTXOs”), whereas Counterparty balances by default are associated with Bitcoin addresses. With a recent upgrade, however, it is possible to send a quantity of a Counterparty asset balance to a UTXO; this is what it means to “attach” an asset to a UTXO. Once an asset balance is attached to a UTXO it can be listed on Horizon Market’s atomic swaps orderbook.