What are Atomic Swaps?
In today’s digital environment, the majority of transactions involve bitcoin exchanges. Nonetheless, real trading data is occasionally fabricated, and none of the well-known cryptocurrency exchanges are concerned about phony quantities. Atomic swaps are a first-rate technology, and many proponents place a premium on them. This essay will explain what atomic swaps are and why they can be highly valuable in the cryptocurrency market.
Atomic swaps are the process of converting one cryptocurrency to another without using a third party. Moreover, atomic swaps virtually eliminate the possibility of counterparty loss and identity theft. Since early 2017, this technology has sparked a spike of interest in the bitcoin world. Atomic swaps are distinct from centralized cryptocurrency exchanges because they use novel cryptographic technology. If a deal fails, atomic swaps generate a cryptographically encoded escrow bill that quickly recovers users’ coins. Furthermore, if the two traders quit trading, their funds are returned to them.
Atomic exchange methods are designed to prevent any user from cheating. Consider the following scenario: Kate would like to exchange her Litecoin (LTC) for Steve’s bitcoins (BTC). First, Kate deposits LTC on the contract URL, acting as a safecoin. Kate creates a key to gain access to the safecoin after creating it. After that, she sends Steve the cryptographic hash of that key. Keep in mind that Steve is unable to gain access to LTC since he just possesses a block key hash and not the actual key. In addition, he generates a separate secured contract address with Kate’s hash, where his BTC is saved. Kate obtains the BTC using the same key, so presenting Steve with his currency. This means that after Keith sends a BTC request, Steve will send an LTC request after producing a currency exchange.
The term “atomic” refers to the fact that these transactions either complete or fail. If either side fails to meet their obligations, the contract is null and void, and the monies are returned to their rightful owners. Atomic exchanges can take place in two ways: intra-chain and off-chain. Intra-chain swaps take place within one of the currency networks. Off-chain trades take place at a different level. Typically, bidirectional payment channels are used in this form of a swap. The majority of these trustworthy trading systems are multi-signature and Time Lock hash contracts (HTLC).
The Primalbasea blockchain platform, which is powered by Waves, is a perfect example. They used atomic interchain swaps to optimize cryptocurrencies. Etherswap was intended to enable a centralized exchange for ERC20 and WAVES currencies. In this sense, Etherswap is a transaction gateway system that facilitates payments without requiring the deployment of two independent lock systems on different blockchains.
Here are a couple of instances from the crypto sector. In an interview, Elena Goldberg, the head of the Amsterdam research lab, stated that they were involved in the development of a gateway feature to move Waves tokens to and from the Ethereum network. Token holders can use this feature to store their tokens in different wallets that support Ethereum. Furthermore, it allows for the exchange of ERC20 tokens. Sasha Ivanov, Waves’ founding director, and CEO added that atomic swaps via the blockchain lock are a great way to exchange tokens between Ethereum and the Waves blockchain and back. So, if you are already an Ethereum user, know how to utilize this network, and don’t want to learn about other blockchains, you can use Prime base tokens.
However, atomic swaps are not yet ready for broad use, but this technology will usher in substantial changes in terms of blockchain interoperability and better interchain trade possibilities. As a result, the use of this technology has the potential to significantly grow the bitcoin business by opening up new avenues for the development of decentralization and peer-to-peer money transfers.
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Tatiana Leverya, Team bit4you.