On September 19th, the first cross-blockchain atomic swap was achieved by the developers of Decred and Litecoin. You might ask, "What is an 'Atomic Swap' and why should I care?" Well, simply put, an Atomic Swap is an exchange between two individuals, in which both sides of a transaction are verified prior to release of sent funds. In other words, two strangers can exchange currency and verify that each has fulfilled their part of the contract before it executes - otherwise the transaction fails and they get their funds back. Why does this matter? Allow me to explain:
It removes a middleman from the equation. If there's one thing the blockchain has done for us, it is removing middlemen. However, at a currency exchange, like Coinbase or Bittrex, or Poloniex, your transaction is processed through a middleman - the exchange itself. When the exchange is removed from the equation, without a middleman of some sort, users are vulnerable to fraudulent transactions and scams. If both sides of the transaction are processed this way by the blockchain, then users don't have to worry about the other individual failing to fulfill their side of the deal. The Atomic Swap handles that.
The swap is done through a "hashed time-lock contract." This is a contract where the recipient generates a proof of payment, that is used to trigger other actions, which in this case, would be the release of funds to both parties. It also gives the recipient the ability to cancel the pending transaction, sending the funds back to the sender. This will allow for much more diversity in smart contracts.
This makes cryptocurrency exchanges between individuals exponentially safer (once this technology is implemented). It also allows users to circumvent exchanges in countries where they are banned, such as China. The downside is that an Atomic Swap suffers increased transaction times, so in some cases it might not be the most efficient method for trading. However, this is a significant improvement to the blockchain technology and promises some significant changes in the way cryptocurrency trading is done.
How do you think crypto trading will change as this technology is refined and widely adopted? Please let me know in the comments. If you enjoyed this article, please upvote, comment, and resteem! Thanks for reading!
Spacecadet1