Ready for the swap?

We recently wrote about atomic swaps and the trustless and decentralized exchange opportunities they offer; atomic swaps are seen as the holy grail of decentralized exchange. Whether an atomic swap between two different cryptocurrencies is possible depends on a number of factors that you can monitor via swapready to track the progress.

Shared functionality

To enable atomic swaps between two different cryptocurrencies, it is important that both cryptocurrencies support certain functionality. If one of the two cryptocurrencies between which the swap must take place does not fully do so, it is not possible to perform the swap completely without trust. For a successful atomic swap between two cryptocurrencies to take place, the following basic conditions must be met:

  • Both cryptocurrencies must support Hashed Time-Lock Contracts (HTLCs) . We have described HTMLs in this article. For this it is necessary that:
    • Both cryptocurrencies support making certain secret numbers public on the blockchain. These secrets are used to set up transactions so that both parties can claim the coins that belong to them at the same time when the secret is released.
    • The cryptocurrencies between which an exchange is to take place have shared hash functions, in order to verify that the shared secret number is indeed the necessary solution for claiming the transactions.

Swaps and lightning swaps

We can distinguish between two types of atomic swaps. First, there are the on-chain atomic swaps, where coins from different blockchains are exchanged using on-chain transactions. Second, there is the payment channel of lightning atomic swaps, where the exchange takes place with transactions in a second layer that runs on the basic network, such as the Lightning Network.

The holy grail of trustless exchange

Atomic swaps are seen as the holy grail of the trustless and decentralized exchange of various cryptocurrencies. The teams behind various cryptocurrencies are therefore working hard to make digital exchange possible. For example, there are already advanced implementations to perform atomic swaps between Bitcoin and Litecoin, and the first atomic swap between these cryptocurrencies has already been successfully performed. You can keep an eye on the swapready.net website to track the compatibility progress between the different cryptocurrencies.

Below is an overview of the status at the moment:

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