What is an Atomic Swap?

The Atomic Swap is nothing more than a smart contract. This contract allows the exchange of one cryptocurrency for another cryptocurrency.

The 1st Atomic Swap was performed by Altcoin Exchange on October 7, 2017. The exchange between Bitcoin and Ethereum blockchain. There is also another contender for who was 1st in such a swap, conducted between Decred and Litecoin.

Atomic Swaps can be off the blockchain or conducted directly between the blockchains of different cryptocurrency exchanges.

To use the Atomic Swap between cryptocurrencies of exchanges, they must incorporate the technology to do so.

Taking a Closer Look at the Atomic Swap

Right now, exchanging cryptocurrency is complex and time-consuming. For several reasons, the problem is a fragmented ecosystem and the understanding of the average trader.

Also, exchanges do not support all coins. Suppose Jody wants to trade her coin for another that the exchange does not support. In that case, she may have to make several conversions in other intermediate coins to make her trade happen—a lot of hoops to jump through for a simple trade. There is also another risk if the trader wants to exchange her coins with another trader.

Atomic Swaps eliminate this problem through the use of HTLC, or Hash Timelock Contracts. HTLC is a smart contract between the parties that contains a cryptographic hash equation that can then be verified.

Both parties must accept and accept the receipt of funds in an established time frame, or the exchange is null. If either party fails to confirm the transaction within this time frame, it is immediately void. The funds are not exchanged. This process stops counter-party risks.

An Example of an Atomic Swap transaction:

Jody is interested in converting 50 Bitcoins to an equivalent amount of Lite coins with Sam. Jody generates a cryptographic hash function number to encrypt this transaction. Sam does the exact same thing at his end by submitting a transaction on Lite coin’s blockchain.

Jody and Sam now unlock their funds using the numbers they generated. They have done all of this in the respective time frame. If they had not made it in the time frame, the transaction would have failed.

By using Atomic Swaps, all trust issues between trading across platforms have been minimized, eliminating other parties just taking the cryptocurrency in the process.

From; https://liquality.io/

About the author

Sam and Jody live in Mena Arkansas and love Compumatrix. Life is simpler when sharing life with others, and being a Christian I see how being there with and for others enhances their lives. How can Compumatrix make your life better?

Comments

  1. Thank you for this article Sam! It puts more light on HTLC between different blockchains. The nowadays fragmentation we have among several blockchains is still an issue to be solved. It’s great to see that people are elaborating on solutions to make the “several chains” communications more simple and secure. Hope in the future we will see yet more integration and consolidation.

  2. I never knew that a Atomic Swap is nothing more than a smart contract. There is so much to learn with crypto currencies .. Yes I know , I will learn it when I need to use it . Until then I try to read and keep up with what is going on in the new ways of doing things .

  3. I done atomic swaps with crypto currencies before I just did not realize that is what I was really doing. I was just exchanging one crypto currency for another. Go figure. Sometimes one dose not know what they are really doing until one reads about it or watches a youTube on the subject.

  4. Increased information about Atomic Swap, amazing Atomic Swap is nothing more than a smart contract, It was learned in great detail that the crypto exchanges with each other,got a lot of information about HTLC. Thank you Sam for an informative blog.

  5. these last two Blogs are so very helpful in understanding that there is a very distinct part of the Crypto world that is Person to person and relies so much on Trust between those Peeps — and from Biz point just like my last post Cover You Always — look beyond the obvious and research and Make Sure — again jmho —

  6. When I first read this, my mind registered the title as “Atomic Swamp” and I thought wow this is going to be interesting. However, I corrected this term and realized this is the title umbrella over the hash time lock contracts that Gail blogged about. Thanks for rounding out this important information a bit more, Sam! Again, good to know there are these choices of security to help generate “peace of mind” for users.

  7. Thank you Sam for the interesting and informative information about Atomic
    Swaps. Just recently we were introduced to HTLC through the latest Compumatrix webinar. I now know that these swaps can also be called Atomic Swaps as well as HTLC, or smart contracts. And the learning goes on for as long as one chooses to continue to learn about this crypto world.

  8. It is great fun learning about all the possibilities for our future. Once we are past the fear of using these new systems, we will embrace them, for they are the way forward in securing so many more transactions in our daily lives.

  9. Wow great info Sam. I also did not know that the atomic swap was like a smart contract and that the fact that the trust issue is so minimized which is so important…With this blog and Gail’s blog on HTLC will be so helpful in the Compumatrix business…

  10. Sam, thank you for the example of you and Jodi. This example made it clear the process of exchanging different cryptocurrencies with another. Of course, as noted, we would need to know with whom we are transacting. Honesty asset is essential. This method of swapping currencies should be quite useful.

  11. Interesting article Sam. We are learning about all the different ways of trading and all the ways that can be done securely and legally. This is good stuff. I know that these things will come in handy soon when we can get our hands on cashoutable funds, If that is even a word ?

  12. Thank you Sam for putting up a blog re Atomic Swaps.This being a smart contract and along with Understand about HTLC is surely going to help us all in the long term as we proceed with the evolution and ultimate fruition of the Compumatrix .Learning process for me is on going and eventually I stand to benefit from all the info I receive from these great education Blogs .

  13. The Atomic Crypto Wallet is awesome at Atomic swaps. Probably why it is called that. Just found it and learning to use it. There is no “regular” exchange attached to it, just a plethora of coins you can hold and swap for each other. Except Bitcoin. There IS a BTC wallet, but once exchanged for BTC, you cannot exchange again. AND there is a large network fee for sending BTC out. Everything else is super cheap. Now I know why it’s called Atomic Wallet.

  14. Thank you Sam for a most informative blog. It certainly opens ones eyes to the extraordinary future that the cryptocurrency market offers. So much to learn but so much to gain.

  15. Sam,
    This was helpful. So much to learn in the Cypto Space.
    Not really interested in leaning about anything with Smart Contracts

  16. this read is very plain and simple in its explanation of this type of peep to peep biz — and honestly from a biz standpoint the more peep to peep actual there is the better I agree with it — but so much today is becoming so automated and it is more non-human for a lack of better way to say it ??? but must adapt and learn if want to stay in a biz today??? good read here

  17. Thanks, Sam. I never knew what an Atomic Swap was, so now I do. Thank you. We all learn as we go. and your right Michael sometimes, you have to get past the fear to move forward.

  18. Thanks, Sam. It makes me feel so comfortable now. That explanation explains it all. I think I would understand how to do P2P. Sometimes I get insecure because of not understanding certain steps and your explanation is right on time.

  19. Thank you. I consider myself to be a newbie. And each of the articles that explain simple things are helpful to me. There is so much to learn and understand. I am excited for the future as it looks incredible. Hope that at some point, I feel secure in my knowledge and am not always — catching up!

  20. Interesting article. My biggest concern about crypoto is the regulators thinking they must do something, They do not like anything new that ruffles their tradional concepts, Long may they stay away,

  21. Very informative stuff indeed!
    I’ve also noticed the difficulties in trading the not so known coins..You have to convert, convert and convert again in order to get them.
    This way sounds by far both easier and smarter!

  22. I love the concept of peer-to-peer transactions without the need for a someone or an institution in the middle. This is how I see Atomic Swaps … clean, efficient, safe and fast. I look forward to learning more about technologies that support the cryptocurrency world … our future!

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