Mid Level Reading
05 Jun, 2024

Atomic Swap

The direct transfer of cryptocurrency from one party to another, bypassing the need for an exchange or intermediary.

What Is an Atomic Swap?

An atomic swap is a mechanism that allows for direct peer-to-peer trading of cryptocurrencies without a centralized exchange.

Unlike traditional exchanges, atomic swaps are decentralized and enable wallet-to-wallet trading using specially designed smart contracts.

Atomic swaps are based on hash timelock contracts (HTLC).

Each HTLC includes a hash lock, which locks and unlocks the deposited currency with a key known only to the depositor, and a timelock, automatically returns the funds to the depositor if the transaction is not completed within a specified timeframe.

Atomic Swap
Atomic Swap

Secure Cross-Chain Trading with Guaranteed Outcomes

With atomic swaps, when a swap occurs, either both parties receive the desired funds, or nothing happens, and both parties retain their original funds (minus a small transaction fee for the “order-taker”).

Atomic swaps provide a high level of security for digital asset trading.

Atomic swaps can be used for on-chain trading across blockchains with native coins.

The technology is protocol agnostic, allowing for asset swaps between cryptocurrencies.

Off-chain atomic swaps offer faster transaction speeds, although they are still under development.

More crypto lingo