The cryptocurrency market is highly competitive. Bitcoin has been challenged in the past by other currencies and ecosystems. They may differ, but they all share a similar difficulty in interfacing with other blockchains.
What is the process of swapping one crypto currency for another?
This is where cross-chain atomic swaps are useful. The health of the whole ecosystem would improve as users could easily exchange their coins and tokens for others. The lightning network will roll out this feature.
Atomic Swaps: A closer Look
Atomic swaps, also known as Atomic cross chain trading, will enable the exchange of coin without the use of a third-party centralised. At the moment, there is only one way to swap coins.
Exchanges of cryptocurrency can be risky, as you have to trust a centralised third-party. Exchanges have failed and tokens have disappeared. It would make things much easier if blockchains could be used to facilitate decentralised transactions.
Here’s where atomic exchanges are useful. You can swap Ethereum directly for Bitcoin with another Bitcoin user. This is also not a brand new idea, as they have existed since 2013. Lightning network is just now showing results from the development of functionality.
What can we do to ensure that this exchange takes place?
Hashed Time Locked Contracts, or HTLCs for short, are a great way to achieve this. This is essentially an electronic smart contract in which the receiver of payment must acknowledge the receipt of funds within a specified time frame. A cryptographic proof will serve as the basis for this.
The recipient could miss out on receiving the money if they do not confirm that it has been received. They can be used to serve a range of purposes, such as acting as an electronic cash register. "trigger" For certain conditions. For example, they could be used for conditional Bitcoin payment for a specific transaction.
The Atomic Swap is a case where each of the parties to the swap submits transactions to its own blockchain. In the example we used, the ETH users will send the transaction on to the Ethereum Blockchain and the BTC users will do so on the Bitcoin Blockchain. The recipient will only be able to claim tokens once the implementation is complete if they can reveal their cryptographic hash.
The Atomic Swaps allow users to create a channel of payment between two chains, which acts as an intermediary. It would allow them to swap coins which they may not have purchased yet so long as they can afford to do so.
What are we doing Now?
Only now are atomic swaps becoming more realistic, as several blockchains implement the lightning network. The lightning network acts as a payment channel between the chains. The lightning network is a complex system that requires coding.
Both chains must have the exact same hashing function. In the case of Bitcoin, this could be SHA 256. The HTLCs must be able use this. "communicate".
At the moment, there is a variety of Altcoins who are able use Atomic swaps. Theoretically, this is possible for any coin which is a fork of the Bitcoin codebase. Recent swaps between Litecoin, Bitcoin and others have been a good example. Vertcoin was swapped for Decred.
It was reported that another Bitcoin cash developer also had completed a similar Atomic exchange with Bitcoin. The Atomic swap will make it possible to pay Bitcoin Cash without any trust. The software’s commands and compilation may seem a little advanced to average users, but the developer has acknowledged this. His goal is to create a user-friendly interface.
Look to the future
It is clear that the adoption of cryptocurrency will increase demand for transactions across chains. Specific crypotcurrencies are being encouraged to introduce atomic-swap functionality, or else they risk losing out on the competition.
The decentralised nature blockchains was one of the primary motivations for the development of crytpocurrencies. Altcoin exchanges that are centralized have in fact been an opposite to this. Atomic Swaps make decentralised trade a real possibility.