What is atomic swap in cryptocurrency
The terms in cryptocurrency do indeed vary, one of which is Atomic swaps, there is also a lightning network, what is atomic swap in cryptocurrency? Atomic swaps are simply a way of exchanging peer-to-peer digital currencies from one user to another. The process without involving third-party services such as a crypto exchange.
During this process, the user has full control and ownership over their private keys. If the term lightning network works on the second layer above the blockchain on Bitcoin transactions. Atomic swaps allowed us to exchange one cryptocurrency transaction with another cryptocurrency. For example LTC with BTC.
Simply put, exchange between cryptocurrency without an intermediary exchange.
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What are Atomic Swaps?
There are many kinds of cryptocurrency digital currencies, from Bitcoin, Litecoin, and so on. If someone is going to exchange Bitcoin with other cryptocurrencies, then he needs to contact the exchange. Then they can buy certain cryptocurrencies with their own cryptocurrency.
But with atomic swaps, users do not need to use the services of exchangers, and can directly exchange cryptocurrency with one another.
According to Binance, an Atomic swap is a technique that allows fast exchange between different digital currencies. And the process runs on a different blockchain network.
The atomic swaps process is also known as atomic cross-chain trading based on smart contracts. This process allows the user to exchange coins directly from his crypto wallet.
Thus atomic swaps are basically peer-to-peer exchanges across the blockchain.
This idea is an innovative Tier Nolan idea that explained the most atomic swap protocol in 2013. But there are reports that a trustless exchange called P2PTradeX, which was introduced by Daniel Larimer in 2012, is a prototype of the atomic swap.
Then many developers began to try experimenting with the atomic swap protocol. The Bitcoin, Komodo, Litecoin, and Decred communities play an important role in the process.
Actually the first peer-to-peer atomic swap occurred in 2014. But only in 2017 will the technique become more popular by the general public – mainly due to the successful exchange between LTC/BTC and DCR/LTC.
Where on September 20, 2017, Decred and Litecoin successfully implemented the atomic swap.
Interesting things to note about atomic swaps are:
- 1. Atomic swaps can be made between separate blockchain with different coins
- 2. Or atomic swaps can also be done through off-chain channels which are branches of the main blockchain
Atomic swaps are also known as cross-chain trading (inter-blockchain)
How does Atomic Swaps work?
How to work Atomic swap protocol aims to prevent fraud between users with one another, it is designed in a way to prevent cheating. To more easily understand how it works, now we take an example. Imagine that Ruben wants to exchange his Litecoin (LTC) to get Thomas’s Bitcoin (BTC).
The first step Ruben deposited his LTC into a smart contract address that acted as a safe. In making this safe Ruben will get a key to access it. After that, the next step is to share the cryptographic hash of this key with Thomas.
At this time Thomas was unable to access the LTC because he only had the hash key but not the safe key. The next step Thomas used the hash from Ruben to make the address of another safe contract, then he deposited his BTC into the safe.
Then to be able to exchange the BTC, Ruben needed the same key. Next, he opened to Thomas thanks to a function known as a hash lock. After this process, Ruben can claim the BTC, and Thomas can claim the LTC and the exchange is complete.
Atomic swaps process
Atomic has something to do with the fact that this transaction occurs in its entirety or not at all. If one of the parties relinquishes or fails to do the work, the contract will be canceled. What happens next is that the funds will automatically return to the owner of the funds.
The Atomic swap process has two different ways: on-chain and off-chain.
Two parties who will be involved in atomic swaps decide a shared secret. Both parties will share their cryptocurrency if – and only if the secret they have is suitable. This way, if someone suddenly appeared in this exchange, he could not take the coin because he did not know the secret that had been determined.
The following is a brief illustration to illustrate how it works.
On-chain atomic swap this process only occurs on one of the digital currency blockchain networks.
While off-chain atomic swaps occur in the second layer. This is usually based on two-way payment channels, as used on the Lightning Network. This trustless trading system is based on smart contracts that use multi-signatures and Hash Timelock Contracts (HTLC).
Hash Timelock Contracts (HTLC)
Hashed Timelock Contracts is a special form of the payment channel. The payment channel is basically a state off-chain channel that records payments.
A state channel is a two-way communication channel between participants that allows them to interact outside the blockchain, which normally appears on the blockchain. What will happen is the transaction time will decrease drastically because investors no longer depend on third parties, such as miners, to validate your transactions.
So what are the provisions for doing an off-chain state channel?
1. A segment of the blockchain state is locked using a multi-signature or smart contract, which is agreed upon by a number of participants.
2.Participants interact with each other by agreeing on inter-participant transactions without giving miners anything
3. The entire set of transactions is then stored on the blockchain
The state channel can be closed at a point determined by the previous participant. Closure can occur due to several things:
1. Time lapsed: for example, the participant agrees to open the state channel and closes it after 2 hours.
2. It can be caused by the number of transactions that occur: for example, closed after a $ 100 transaction occurs.
Then, what is HTLC?
HTLC develops payment channels that use “timelocks” by introducing “hash locks” along with existing timelocks.
HTLC allows opening payment channels where a fund can be transferred between parties before a predetermined deadline. This payment is known through the submission of cryptographic evidence. At the same time, another HTLC feature allows one party to cancel the payment given to him and return it to the party making the payment. The point is to use a multi-signature transaction system that makes both parties responsible for the success of a swap.
Limitations of Atomic Swaps
1 Adoption, the limitation faced by atomic swaps today is that there are three conditions that must be fulfilled so that two cryptocurrencies can be involved in atomic swaps, namely
- Both cryptocurrencies must have a hash algorithm attached to =
- Both digital currencies must be able to start hashed timelock contracts
- Must have special programming functions
At present, these three conditions will greatly limit the amount of cryptocurrency that can be involved in atomic swaps.
Atomic swaps still need a lot of improvements to be fast enough to handle large volumes of data. Especially for this, lightning networks can greatly help atomic swaps
3. Lack of compatibility
Nowadays there are many wallets that have sprung up and adopted atomic swap technology, but in fact, the number of compatible wallets and exchanges is still very low. More support is needed from the exchange so that usage and research on atomic swaps can be wider.
Atomic wallet coin
Atomic wallet is a wallet designed to put coins from atomic exchanges and become part of a decentralized cryptocurrency ecosystem. To use atomic wallet users download and install it on a computer which will be the physical form of the atomic wallet.
You save your private key and other information on your PC in encrypted form. The atomic wallet application will then interact with the blockchains of supported coins.
Atomic Wallet Coin is also available for Windows, Ubuntu, Mac, Debian, Fedora and Android, and iOS-based smartphones.
How to use Atomic wallet
- Open wallet.
- Select the coin you want to receive and click then.
- Click on Receive to see a detailed address public wallet.
- Click on the address to copy, or you can use QR code to move assets between address directly without copying and sending.
- Return to the address where you will send the assets, then send it with the atomic wallet address that you copied.
- After you send an asset, it will appear in the atomic wallet safely.
Atomic wallet fees
Basically, atomic swaps do not take any fees when sending and receiving assets. But most blockchain transactions take fees that will be given to miners.
So the amount of the atomic wallet transfer fee will depend on the assets to be sent and received. The fee for BTC is used in satoshis units per byte, while for Etheremum networks using Gas units.
Ideally, the greater the value per byte of assets sent, the higher the fee will be charged to be given to miners.
Atomic wallet download
Atomic wallet is always updated with the latest updates, you can find atomic wallet downloads, and choose the equipment you use, whether it’s a desktop with Windows, or an Android-based smartphone or iOS.
Atomic swap coins list
Atomic swap users can send various cryptocurrency assets including atomic swap Altcoins, including atomic swap Litecoin, atomic swap Bitcoin.
Entire Atomic swap coins list are
- Bitcoin Cash (Bitcoin Unlimited, Bitcoin ABC, and Bitcoin XT).
- Bitcoin (Bitcoin Core).
- Litecoin (Litecoin Core).
- Particl (Particl Core.
- Monacoin (Monacoin Core).
- Particl (Particl Core)
- Polis (Polis Core).
- Vertcoin (Vertcoin Core).
- Viacoin (Viacoin Core).
- Zcoin (Zcoin Core).
Atomic swaps are solutions for exchanging crypto coins with one another, without having to use the services of exchangers. But this process requires a separate knowledge to be able to do that.
This might be a bit more complicated than using an exchange service. But it is possible to accept another cryptocurrency if both users have an agreement to make transactions with atomic swaps.
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