Atomic swaps, or atomic cross-chain trading, is the exchange of one cryptocurrency to another cryptocurrency, without the need to trust a third-party. A relatively new piece of technology, atomic cross-chain trading is looking to revolutionize the way in which users transact with each other. For example, if Tom owned 6 Bitcoins but instead wanted 120 Litecoins, she would have to go through an exchange, i.e. a third-party. However, with atomic swaps, if Jenna owned 120 Litecoins but instead wanted 6 Bitcoins, then Bob and Alice could make a trade. In order to prevent, for example, Alice accepting Bob’s 120 Litecoins but then failing to send over her 6 Bitcoins, atomic swaps utilizes what is known as hash time-locked contracts (HTLCs).
If recent news is anything to go by, the future of atomic cross-chain trading looks bright. Creator of Litecoin, Charlie Lee, successfully completed atomic swaps using Litecoin in exchange for Bitcoin, Vertcoin and Decred. With continued innovation, the desire is that the technology of atomic swaps will allow us to run decentralized exchanges that will be convenient for the average user.
According to Rachel O'Leary, developers are growing concerned about the blockchain infrastructure as a new generation of crypto users begin to invest in the technology, They've seen this happen before – new users enter the space attracted by big gains, then suddenly, a catastrophic failure, usually at the very exchanges designed to hold and custody those funds.
Andrew Gazdecki, CEO and co-founder of Altcoin.io, which recently launched a beta wallet for atomic swapping between crypto tokens argues that users should be empowered to hold their own private keys (the alphanumeric strings that allow users to unlock, access and spend their funds) without relying on others.
"There are literally billions of dollars being held within these digital honeypots, and it's nearly impossible to find the perpetrators," he said.