What
Atomic swap is the swap of 2 coins on a separate blockchain system, based on smart-contracts, allowing users to trade coins directly from the wallet. => Peer-to-peer transactions between different blockchains.
Why
Cross-chain trading can eventually solve many of the problems that are part of most centralized exchanges Greater vulnerability keeping many valuable resources in one location makes them more vulnerable to hacking, and centralized exchanges are prime targets for digital heists. => lưu lượng tiền lớn -> dễ bị hack (trứng cùng một rổ) Funds mismanagement and human error maintain by human => cause error sometimes Higher operational costs Inefficiency in regards to volume demands: khối lượng giao dịch nhiều => thường bị nghẽn do ko giải quyết được hết Regulation legal
Cross-chain trading can eventually solve many of the problems that are part of most centralized exchanges Greater vulnerability keeping many valuable resources in one location makes them more vulnerable to hacking, and centralized exchanges are prime targets for digital heists. => Big cash flow -> Big chance of getting hacked Funds mismanagement and human error maintain by human => cause error sometimes Higher operational costs Inefficiency in regards to volume demands: High transaction volume => Cause blocking in transaction Regulation legal
Advantage
By removing the need for a centralized exchange or any other kind of mediator, cross-chain swaps can be executed by two (or more) parties without requiring them to trust each other
- increased level of security because users don’t need to give their funds to a centralized exchange or third party
- lower operational costs as trading fees are either very low or absent
- happen quickly (altcoins can be swapped directly without making use of Bitcoin or Ethereum as an intermediary coin.)
Limit
For instance, to perform an atomic swap, the two cryptocurrencies need to be based on blockchains that share the same hashing algorithm (e.g., SHA-256 for Bitcoin). Also, they also need to be compatible with HTLC and other programmable functionalities. bring up concerns about users privacy (?) -> on-chain swaps and transactions can be quickly tracked on a blockchain explorer, making it easy to link the addresses.
How it works
(https://www.youtube.com/watch?v=WkXUz3UFn6Y)
A swap his LTC to receive B's BTC A send a contract address, which requires a key to access. A send a hash of this key for B => B can't access the LTC because he only has the hash of key
B uses the provided hash to create another contract address, in which he deposits BTC. To claim the BTC, A requires the same key. As soon as A claim the BTC, B is able to claim the LTC.
If any party gives up or fails to do, the contract is canceled, the funds are automatically returned to their owners.
On chain Happen on either of the currency's network. (In this case, it's Bitcoin and Litecoin)
Off-chain Off-chain atomic swaps, on the other hand, take place on a [secondary layer]. This kind of atomic swaps is usually based on bidirectional payment channels, similar to the ones used in the [Lightning Network]
Hash Time Lock Contracts Hash Lock: prevents money from being spent except for predefined data Time Lock: ensures the contract is only executed within a certain time frame => Create a set of rules to prevent partial swap.
