Atomic swap bitcoin litecoin

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What is Atomic Swap and how to implement it - Blog - AXIOMA

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Your Practice. Popular Courses. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. A hashed timelock contract is a smart contract used in cryptocurrencies to configure time-bound contracts.

What Are Atomic Swaps?

Lightning Network Lightning Network is a second layer to bitcoin's blockchain that proposes to decongest its network by creating micropayment channels between two parties. They can be used for a variety of transactions, financial and non-financial, and are expected to create new trading markets in the future. Launched in the year , Litecoin is an alternative cryptocurrency based on the model of Bitcoin. Interledger Protocol Interledger protocol is a protocol that establishes connections between different payment ledgers and enables fast processing of cross-border transfers.

Cryptocurrency A cryptocurrency is a digital or virtual currency that uses cryptography and is difficult to counterfeit because of this security feature. Partner Links.

What are atomic swaps?

Related Articles. First, Alice deposits her LTC into a contract address that acts like a safe. When this safe is created, Alice also generates a key to access it.


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She then shares a cryptographic hash of this key with Bob. Next, Bob uses the hash provided by Alice to create another safe contract address, in which he deposits his BTC. To claim the BTC, Alice is required to use that same key and, by doing so, she reveals it to Bob thanks to a special function called hashlock. If any of the parties give up or fails to do what they are supposed to, the contract is canceled, and the funds are automatically returned to their owners.

Atomic swaps can happen in two different ways: on-chain and off-chain. Off-chain atomic swaps, on the other hand, take place on a secondary layer. This kind of atomic swaps is usually based on bidirectional payment channels, similar to the ones used in the Lightning Network.

Atomic Swaps Defined

Technically speaking, most of these trustless trading systems are based on smart contracts that use multi-signatures and Hash Timelock Contracts HTLC. As the name suggests, they are based on two key functions: a hashlock and a timelock. Timelock is a function that ensures the contract can only be executed within a predefined timeframe.

Consequently, the use of HTLCs removes the need for trust because they create a specific set of rules that prevent atomic swaps from executing partially. The biggest advantages of atomic swaps are all related to its decentralized nature. By removing the need for a centralized exchange or any other kind of mediator, cross-chain swaps can be executed by two or more parties without requiring them to trust each other. Also, this form of peer to peer trading has much lower operational costs as trading fees are either very low or absent.

A Brief History of Atomic Swaps

Lastly, atomic swaps make it possible for trades to happen very quickly, with higher degrees of interoperability. In other words, altcoins can be swapped directly without making use of Bitcoin or Ethereum as an intermediary coin.

Atomic Swaps Explained - Bitcoin Litecoin Decred

There are a few conditions that need to be met for an atomic swap to take place, and these may likely present obstacles for the technique to be widely adopted. For instance, to perform an atomic swap, the two cryptocurrencies need to be based on blockchains that share the same hashing algorithm e. Also, they also need to be compatible with HTLC and other programmable functionalities.

TB falls into the blockchain at Ttb time. Bob tells Alice the details of TB. Step 5. Alice checks the TB contract. The value of the contract must be in accordance with the original agreement, 10 LTC. It is also necessary that the contract is still valid the established Locktime should allow completing the exchange.

With this action, Alice tells Bob key K. Now that Bob has recognized the key, he has access to transaction TA. This completes the exchange process. Thus, due to the use of delays in contracts, each party has enough time to get its amount as in the contract. Alice in this case, after 48 hours, will take back the BTC, to which Bob will not get access.

Therefore, this transaction, consisting of two contracts, is called atomic. Each receives his agreed amount of currency, or both parties remain with their initial amount, minus a commission. These shown exchange methods need full blockchain nodes, where the exchange could be made. There are not so many exchangers that implement reliable ACCS. Since the Lightning Network is still far from widespread adoption, we consider only on-chain solutions. Online - a cryptocurrency web wallet with the ability to exchange via atomic swap [6].

It is possible to create a new exchange request or to choose from already created ones via Orderbook. When creating an order, you can specify that you want a partial redemption. When the counter application is found, an exchange is made. It is carried out automatically if the wallet is currently open. Both users create transactions to each other's addresses, then take the received funds one by one, by sending a second transaction. The time for the exchange transaction is 3 hours, after which it is possible to return your funds.

If there are not enough funds for an exchange in the wallet, a dialogue is displayed inviting you to deposit the missing amount into your wallet including the transaction fee.


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