Understanding Atomic Swap - An Important Role For Crypto Trade

rahmat (54)in #atomicswap • 6 years ago

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Atomic Swap is a method to trade or exchange crypto based currencies (Cryptocurrency), automatically, without requiring third parties. In the development of the crypto world, the use of the Atomic Swap method is believed to be the right solution in realizing a more efficient, secure, and non-interfering cryptome trading exchange from third parties as service providers.

How To Work Atomic Swap

we can see that the Atomic Swap is designed to handle transactions between two different crypto currencies. Atomic Swap is a method that can exchange currency crypto in "cross chain", directly, without going through any third party services.

How the Atomic Swap works, can be done in two ways:

On-chain
Off-chain

Between the two ways above, Atomic Swap works by using Hashed Timelock Contracts (HTLCs). The use of this HTLC, is derived from the concept of bitcoin community that implements Lightning Network.

Hashed Timelock Contracts – HTLCs

llustration of the workings of Atomic Swap (source: Coincentral)

HTLC is a payment system methodology, using the hashlocks and timelock functions. Both the hashlock and timelock must be included in order for the recipient of the transaction to be aware of the delivery of the transaction, and then generate the proof of payment for the payment claim, and handed over to the sender of the transaction.

When the recipient of the transaction generates a key proof of payment, it can also serve as a trigger for the execution of transactions on the other. Thus, overall, HTLC becomes a fairly productive and secure payment method for both parties in a transaction.

While the timelock function, as a certain time-based warranty, if the terms and conditions in the contract are not met and failed, while it has passed the specified time limit, then automatically the funds between the two parties in each chain will automatically return .

In outline how it works, HTLC serves as a contract by using multisignature transactions, almost the same as Lightning network transactions. Contracts in this HTLC system serve to both withhold transactions by adding certain terms and conditions. When the terms and conditions are met, then automatically also the contract can be executed automatically between both parties.

Why Atomic Swap Become Quite Important

Conventional crypto exchanges that generally use centralized systems, with centralized centralized management, are always potentially harmful to users. Good potential for hacker attacks, depressed with regulation that may come suddenly, potential fraud and many others.

Some things to understand is that between the two blockchain must also first apply the Atomic Chain function in order to run. In addition, Atomic Chain also applies to the same type of algorithm in both the blockchain. Of course this becomes quite important if we look at how the potential loss for users if we look at the scheme of conventional crypto exchanges so far.

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Use decentralized Atomic Swap Exchange to proceed with cross-chain swaps avoiding third party risks. Instant limitless exchange service provided by Changelly. Fixed rate exchange provided by ShapeShift.

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