One major challenge the online market place has to grapple with is trust. If you go to a physical store to make purchases, you’ll pick what you desire and make payments just before using the exit. If this purchase is from an individual, you simply find a safe location where the exchange is done and everyone goes home happy.
Now we’re on the net, you saw this gadget you need so dearly being advertised by some person in a different continent. How the heck can you be sure this guy would deliver on his promise when you’ve completed your side of the bargain (made payment). Traveling down to make the exchange won’t be economical. The second option would be to use a middle man. Till date the use of middlemen seem to be the safest and most economical option for remote transactions. This is what has made alibaba, ebay and amazon multi-billionaires today. People pay for the actual product and then for trust. Transfer of physical products might never be done without third parties in any foreseeable future but the transfer of digital assets seems to have an option.
The ever evolving world of computer science seem to be on it’s way to take out these third parties especially in the crypto sphere.
Few days back, Decred posted on their blog how they successfully carried out the first Decred/Litecoin On-Chain Atomic swap. Earlier this year, Komodo announced their first successful on-chain swap.
Atomicity in computer science is just a manner in which two events are tied together so that they both happen simultaneously or not happen at all. This is analogous to a scene where Peter shakes Paul. It’s impossible for Peter to be shaking Paul without Paul as well shaking Peter. They are both shaking hands or not shaking hands at all. The idea here is that both events though different there success is tied to the success of the corresponding event.
The two exchanging parties would have to sign a transaction with their keys paying the counterparty the prevailing equivalent of the desired token. This is written into a time locked contract which would require the counterparty’s digital signature to unlock. This is then put unto the blockchain.
Opening one of the locked contract automatically reveals the keys to the blockchain which the counterparty could use to unlock his own tokens since both side require the same keys. The initially unlocked contract has been broadcast to the blockchain and cannot be undone.
If the initial party delays unlocking his own side and the time of expiration of the contract passes, the commitments are reversed, so no one loses.
As time goes on, we'll hopefully be seeing more user-friendly interfaces and means for carrying out this process.
In the following article I would detail the pros and cons of off-chain swaps as compared to those on a blockchain.
LONG LIVE CRYPTOS!
Great article! I wrote something similar the other day. I'm excited to see how atomic swaps develop and where the technology goes from here... https://steemit.com/crypto/@spacecadet1/decred-and-litecoin-make-history-with-an-atomic-swap
HOPEFULLY IN THE COMING MONTHS EXCHANGERS WOULD BE USED MAJORLY FOR SWAPING COINS WITH DIFFERENT SCRIPTING LANGUAGES. SAY ERC20 FOR SCRIPT TOKENS
THANKS
You're welcome! I'm hoping that other cryptocurrencies adopt this technology soon.
Disclaimer: I am just a bot trying to be helpful.
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