Blockchain proponents wish to see it evolve and its scope widen to include numerous use cases including novel ones. While we know blockchain is redefining various industries, we understand that the non-cumulative nature of the blockchain ecosystem has become somewhat of a hindrance to it becoming what many people wish it could. This becomes apparent when you understand that the different blockchain platforms exist in different chains that do not allow for token exchanges or trades between tokens belonging to different blockchain technologies.
The Challenges That Arise
This non-existing interoperability leads to various challenges for those who wish to use the blockchain and exchange tokens between different or multiple blockchains. A popular solution is to use an intermediary, usually an exchange. However, that is not a perfect solution for those who would not like to use this option.
There are some projects built on the Ethereum protocol that allow trading and swapping assets without an intermediary. Even with other solutions like sidechain protocols allowing for the exchange of value between supporting blockchains, the freedom to move tokens on different protocols was still lacking.
Cross-chain Swaps Are a Viable Solution
A cross-chain swap is a technology that allows parties to exchange tokens between blockchain ecosystems including unique and different ones. Users can exchange tokens on other blockchains without a central authority or intermediary.
A cross-chain swap allows exchanges between members in a blockchain network, with the swaps happening directly from the wallets of the users making the swap. This results in a faster process as long as the two parties involved agree on time.
Decentralized exchange platforms like Alium Finance allow cross-chain swaps for peer-to-peer swaps and trades between various networks and have been at the forefront of championing and popularizing these types of swaps.
A Major Benefit of Cross-chain Swaps
Cross-chain swaps are also known as atomic swaps, a term used to describe individual transactions. This means there has to be an agreement between the two parties in the exchange, failure to which the whole process becomes invalid.
In a non-atomic approach, one party sends out a specific token hoping someone on the other end will send them a different token. This opens the process to fraud because the receiving party can exit the exchange after receiving the tokens and without sending the requested tokens back.
Atomic swaps ensure both parties have received the valid tokens they asked for in a given timeframe. If not, the transaction is void. The sender receives back the exact token amount they had put up. This process allows cross-chain (atomic) swaps to eliminate fraud and manipulation of the whole system.
Security Features
Cross-chain swaps use smart contracts enabled by Hash Time Lock Contracts that lock the transaction using unique combinations that ensure transactions happen on both ends. The security features included in this process are hashlock, which allows the contracts to lock tokens with secret keys and a timelock mechanism that puts time constraints on transactions to ensure they are secure.
Conclusion
Cross-chain swaps are hugely advantageous in a world that is progressively seeing the utility of the blockchain network and the different tokens available within it. It ensures a much faster and more secure exchange process free of manipulation and fraud.
Posted Using LeoFinance Beta
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