What is an Atomic Swap?
An atomic swap is the ability to swap different types of tokens of cryptocurrencies across different chains. So an example would be, I would be able to swap a Litecoin for a Bitcoin without having to use a centralized exchange. Now, from a technical standpoint, this has been possible for quite a while. It's just been a little bit clunky, but now with the improvements to the protocol like a segregated witness and also fixes to go into a place that addresses things like transaction malleability, atomic swaps are a much more realistic thing.
It essentially allows you to swap one cryptocurrency for another by submitting transactions to both blockchains. One party has a shared secret which is, logs from the other person's view but when they complete their side of the deal, that secret becomes obvious to the person on the other side. The user is then able to use that shared secret to redeem the currency for the currency that they just exchanged. Now, this is really cool because it means that if you agree with somebody on a certain price, for example, I'm going to trade one Bitcoin for x amount of Ethereum, I can do it all without having to have an intermediary or a third party.
The obvious problem though is that you have to be in contact with that person and negotiate the terms one on one before you go through with the atomic swaps. Atomic swaps are getting a bit more attention right now because Charlie Lee, the founder of Litecoin was able to do an atomic swap with somebody on the Decred platform. But again, this did involve offline communication between Charlie Lee and the other party in order to facilitate this trade. So, I think atomic swaps are really cool and they are related to the lightning network. But the one issue we need to solve is how those trades are negotiated in a scalable way. Right now exchanges fulfill that by doing the automatic auto-matching.
Atomic Swaps are how decentralized exchanges going to function. The decentralized exchanges will have an off chain system though for matching people and negotiating those trades. Somebody will say, hey I want to trade this amount of Ethereum and a person on the other side will be able to pick that up and then do the atomic swap. It's still really early days, but it's good to see that we are making progress on this front and I believe over the next 12 to 18 months we are going to see it hit the mainstream.
This is really a big milestone in the crypto space, as much as it is simple it really proves that cross chain atomic swap really works. This is the future of cryptocurrency exchanging. Skeptics who are always doubting the potential of cryptocurrencies won't be able to stop this. What you guys think about it? I would like to read what you guys think down in the comments below. Get the discussion going can atomic swap going to stop the need for the majority of the exchange transactions?
References and Further Reads: 1 & 2
Upvoted. I'm going to resteem this now :]
thanks for the support :)
That info was new for me and really helpful
I'm glad you found it helpful.
Just keep sharing the good work :)
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This is interesting maybe wallets like Jaxx and coinomi could do this and make things simpler andore direct/safer
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