What is counterparty in SAP?

Could you please elaborate on the concept of "counterparty" in the context of SAP? As a financial and cryptocurrency professional, I understand the term in general terms as referring to the other party involved in a financial transaction, but how does it specifically apply within the SAP system? Is it used to denote a specific type of entity or transaction partner within the software, and if so, how does it impact financial management and reporting processes?