Atomic Swaps: the What and the How – Jelly-market
Explained in a simple infographic
After a short observation of the cryptocurrency world, you may conclude that it is strongly polarized. Most of the cases it appears to be Bitcoin against all other networks. Once Atomic Swaps get adopted, these useless debates will finally stop.
Atomic Swaps are a concept introduced back in 2013 which finds a solution to the interoperability problems between the different coins and blockchains with the goal to make them work together. It is interesting to see the early enthusiasm spread in Bitcointalk. Few years have passed since then until the ecosystem matures enough to welcome some of the first successful implementations of such swaps.
Don’t get confused — until now you could buy Bitcoin for altcoins and back on centralized exchanges and pay the respective fee to the intermediary, but you couldn’t transfer value successfully over the different chains peer-to-peer paying only the unvoidable gas fee.
This is how atomic swaps are going to improve the blockchain ecosystem and make all the chains interoperate. They will help users send value directly with each other without relying on third-parties and centralized platforms. Moreover — they will remove the need to trust the other person by eliminating any chance of losing your money. The swap will either happen and both parties will receive the desired value, or it won’t and they will get their coins back.
This is all secured by a technology called Hash Time Called Transactions which we have already explained here in details. This time we will try to do it in a more visual way in order to stimulate your visual perception and help you understand the process.
In our example Alice has BTC, Bob has ETH and they want to exchange them. Alice sends BTC on the Bitcoin blockchain, and Bob sends ETC on the Ethereum chain. The recipient can only claim this transaction by revealing a secret number. The two transactions will be linked to one another, despite them taking place at two different blockchains.
Atomic Swaps has the potential to replace cryptocurrency exchanges forever. As this technology matures, we should see increased adoption among decentralized exchanges and wallets. The future of Finance is decentralized and the year 2020 will get us closer to that. It is certainly something to look forward to.