On September 19th, the first cross-blockchain atomic swap was achieved by the developers of Decred and Litecoin. You might ask, "What is an 'Atomic Swap' and why should I care?" Well, simply put, an Atomic Swap is an exchange between two individuals, in which both sides of a transaction are verified prior to release of sent funds. In other words, two strangers can exchange currency and verify that each has fulfilled their part of the contract before it executes - otherwise the transaction fails and they get their funds back. Why does this matter? Allow me to explain:
It removes a middleman from the equation. If there's one thing the blockchain has done for us, it is removing middlemen. However, at a currency exchange, like Coinbase or Bittrex, or Poloniex, your transaction is processed through a middleman - the exchange itself. When the exchange is removed from the equation, without a middleman of some sort, users are vulnerable to fraudulent transactions and scams. If both sides of the transaction are processed this way by the blockchain, then users don't have to worry about the other individual failing to fulfill their side of the deal. The Atomic Swap handles that.
The swap is done through a "hashed time-lock contract." This is a contract where the recipient generates a proof of payment, that is used to trigger other actions, which in this case, would be the release of funds to both parties. It also gives the recipient the ability to cancel the pending transaction, sending the funds back to the sender. This will allow for much more diversity in smart contracts.
This makes cryptocurrency exchanges between individuals exponentially safer (once this technology is implemented). It also allows users to circumvent exchanges in countries where they are banned, such as China. The downside is that an Atomic Swap suffers increased transaction times, so in some cases it might not be the most efficient method for trading. However, this is a significant improvement to the blockchain technology and promises some significant changes in the way cryptocurrency trading is done.
How do you think crypto trading will change as this technology is refined and widely adopted? Please let me know in the comments. If you enjoyed this article, please upvote, comment, and resteem! Thanks for reading!
Spacecadet1
Great news, thanks for the info! Are atomic swaps now possible for anyone to do? Can they be done with any other tokens other than LiteCoin and Decred? Any idea what allows this to be done for LiteCoin and not BitCoin, and will BitCoin get this too as well since they are so similar?
Based on my knowledge of the situation, it is possible for others, but they put in a ton of work to do it specifically for Decred and Litecoin. I assume the method will find its way into the crypto community at some point, whether they share it or someone else figures out how to do it.
I'm not exactly sure, but I think that Bitcoin's blockchain is a bit more rigid, which is probably why they tried it with Litecoin and Decred. I'm not exactly sure whether it will end up part of Bitcoin's blockchain. It would require over half of Bitcoin users to vote in favor of changing it to add the feature, if I'm not mistaken, and a majority of Bitcoin users seem highly opposed to editing the blockchain, even if you could get over half of them to vote.
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nice post!
Thanks! I read about it and thought people might be interested.
indeed, you should have included some more technical information tho ;)
Good to know. Thanks for the feedback!
I have added a few more details, but I'm not an expert on the technology so I am trying to avoid making mistakes in explaining the technical information.
interesting info @spacecadet1! thank you!
I'm glad you enjoyed it! Thanks for reading!
Sweet info, I've been wondering why this system wasn't an original implementation by Satoshi. I'm not too big on the technology, so I can't really say this is how it should've always been, but this seems to be a solid step toward decentralization, and even the original concept, regardless of the current holder's stubbornness. This is what I was hoping Bisq and Local already had, get on it already Bisq and Local, I'm looking at you.
I'm glad you enjoyed it. Yeah, that is the one downside to Bitcoin. It was the first and deserves the fame for starting the crypto movement, but the newer ones are coming up with more efficient and more creative systems. It will be interesting to see how the landscape changes over the next few years.
@greenman I'm curious to know what you make of this.