Bitcoin Forum

Do you think that once the Lightning Network becomes used in the mainstream world, it will eliminate the need for centralized exchanges with its atomic swaps feature?

This brings a new breakthrough in the Blockchain space, as it would allow anyone to exchange one coin from the other in a P2P fashion without the need to interact with an exchange platform. The approach seems to be much more convenient than decentralized exchanges themselves too, as the process of exchanging coins is seamless.

Still though, even if atomic swaps don't succeed in taking over centralized exchanges, they'll be a nice alternative for anyone who's looking for a quick and easy process to exchange one crypto to another without the intervention of a middleman.

In some ways, centralized exchanges seem to be too big to fail as they're the ones with the most liquidity, and money. Still though, as people realize the risks of hacks and theft within centralized exchanges, they will resort to other means. Which is why, there might be a possibility that decentralized exchanges and atomic swaps will become extremely popular in the future.

Nonetheless, what do you think about this? :)

Perhaps it will be as it will bypass KYC process and a painstaking creation of account and all those processes just to exchange apples to oranges. Also, knowing that this will be seamless, who wouldn't want to get what they wanted in just a few moments? In a fast-paced world where everyone seemed to be always chasing something, atomic swaps is a pretty neat idea that suits their needs. Anyways, the hardest part of this perhaps is starting. We all know that centralized exchanges already have the edge. LN Atomic Swap must generate enough hype, interest and users in order to go against centralized exchanges in the future.

It will only eliminate centralized exchanges and services when people run their own LN node, which I can't see happen. If you use a third party node, you're not much better off than using a centralized exchange.

Don't forget that Bitcoin's blockchain is only increasing in size, so the resources needed are getting more expensive and it will also require the private keys to be online all the time, which is something to take into consideration.

It will take years before atomic swaps will become a thing you and I will use on a frequent basis. It's not that I think it won't happen, but I'm just being realistic here. LN has a lot more maturing to do.

LN atomic swaps are possible but things still need to be worked out
such as:

1. price discovery
imagine it like localbitcoins. loads of listings of offers but no aggregated 'average price' with no central lookup for people to see an average price, it makes the 'store of value' more volatile as there would be no common spot price

just try using local bitcoins without looking up a website that shows an average price. you will find it a little harder to set your own price. and if everyone tried it. the price would go all over the place

2. speed of trade
exchanges offer fast trading which can be profitable. but if people have to search out trading partners in LN under a peer to peer scenario and then route to that peer, is slower than an exchange based trade. there can be instances of by the time you found someone offering a trade, by the time you commit a signed htlc, the other peer has already took an offer from someone else.
this is an actual problem, bcause even in central exchanges they have issues of multiple uses trying to make/take same orders which is where trading engines get designed. in LN doing per-to-peer atomics. there is no way to have a engine managing offers.

3.offer discovery
with routes having to 'find their own way' by going through partners in a 'try, if fail try else' method to get a destination. trying to find an offer involves searching all active nodes for possible offers. this alone can be very bandwidth heavy pinging thousands of nodes. and by the time you found 1-3 offers, one of those could have expired by someone else taking up the offer

summary
LN will become more central around hubs and factories which offer central services like exchanges with trading engines to get around issue above. the ONLY difference of 'centrality' is that its accessed via a node interface rather than a webbrowser interface

You can view atomic swaps as a decentralized exchange (DEX), and the main limitation of DEX is that it only works with cryptocurrency, because cryptocurrency is programmable money - it can execute transactions automatically and under certain conditions, but with fiat you can't do that, because fiat payments are centralized, and even if they provided an API, it still wouldn't work well with crypto. So, centralized exchanges will exist for as long as centralized money exists, and since crypto is not going to replace fiat anytime soon, centralized exchanges aren't going anywhere.

Centralized exchanges will always be needed when trading FIAT x Crypto.

Atomic swaps is amazing, but you cannot atomic swap USD, and USDT is not USD.

Centralized exchanges are currently a major point of failure for cryptocurrency- frauds,widespread hacks,privacy violations,government take over (just to name a few), LN atomic swaps is sure to be a welcome alternative, the only challenge will just be the crypto -to- Fiat conversion by users

Exactly. The LN's atomic swap feature must become widely adopted by the mainstream world, or else, centralized exchanges will still be the norm within the crypto space. One concern of the capabilities of the Lightning Network, would be its regulatory implications at least in the US. The FINCEN could easily categorize LN nodes as MSB (Money Services Businesses), especially when atomic swaps allow the exchange of one crypto to the other. As such, anyone running an LN node providing atomic swap functionality, could be easily targeted within the US.

Still though, the idea is great as there would be no need to use an exchange platform which is often complicated and takes time to use. Centralized exchanges might survive as they have a lot of money invested in this space. Binance is a big player here, and might not want decentralized alternatives to succeed (although it has launched Binance DEX). It's only a matter of time whenever people choose from one concept to another.

Nonetheless, the LN is still in development and not widely used within the mainstream world. Which means, that it could take years before we could be able to experience atomic swaps at their full potential for safe and secure P2P crypto trades. Just my thoughts ;D

maybe some day but not anytime soon.
in my opinion LN and atomic swaps not being ready and mass adopted is only part of the problem. the other part is that people aren't ready to give up the ways that they are used to so they keep using centralized exchanges even though they are horrible and keep scamming their users.
not to mention that for trading bitcoin, usually fiat is involved so i don't see how you could decentralized that.

that doesn't solve the issue of fiat onramps. atomic swaps will be great for bitcoin/altcoin/token swapping, but what about people with fiat money who want to buy coins? or those who need to sell coins for fiat in their bank account? LN does nothing for them. these people will mostly turn to centralized exchanges.

People depend on centralized exchanges for a reason, the high liquidity and the ease of which they can execute their orders and some major exchanges allow features such as stop loss and other options to make things easier for the users and so is the reason decentralized exchanges did not get much traction or liquidity even though there are many in the  market and that will be the case with any other feature, as you mentioned it will be an alternate option for swapping small amount of coins.

as long as LN is limited to crypto to crypto transaction I doubt it can eliminate centralized exchange sites since
centralized exchange is not only focused on crypto to crypto transactions and the market they cover is wider
than LN.

That's true. Plus there's also a decentralized exchange called BISQ, which doesn't have much users until now, and it has been around before Lightning.

Maybe not everything should be trust-minimized?

Centralized exchanges are getting to be more powerful these days and I dread to think of the time that they can be running the whole cryptocurrency show on their own. The coming of LN's Atomic Swaps can help check the growing influence of the centralized exchanges though we should be realistic in not expecting that this can put those exchanges out from the center of the action. This can therefore be existing alongside with the exchanges and a great option for all bitcoin lovers all over the world.

I think a lot depends on what type of user you are. I only use exchanges to switch coins, never to trade. In that case if something like this was implemented it would be perfect for me.

Most traders want order books to play with and centralised operations are the easiest way of accessing that.

Regardless of who or what you are the option should be there to completely bypass the need for anyone other than you to control how and where you swap your coins. It's one of the biggest missing elements and the sooner it's addressed the better.

If crypto's ever to become a closed loop then the inability to exchange painlessly and without permission is a significant inhibitor.

i am fairly certain that centralized exchanges that work with decentralized cryptocurrencies will eventually cease to exist. lightning network and atomic swaps and all the other progress that we are making in the decentralized exchange front is only one part of the reason, the bigger reason in my opinion is that the centralized exchanges have ensured their own eventual demise by providing terrible services that aren't even safe.

In my opinion, this is just wishful thinking op. The reason why so many people including me prefer centralized exchanges over decentralized platforms despite the hacks and scams over the years is due to the ease of usage and regulatory authority which is somewhat comforting.

I am not saying that decentralized platforms are pointless, but they will gradually rise in popularity over time. However, atomic swaps or anything else will never overtake centralized exchanges in terms of popularity.

Why would anyone actually want a centralised exchange if there's another option? You're willing to risk the total loss of your coins for 'ease of use'? Something in wallet and on chain will be effectively instant and foolproof.

And you don't have to send photos of your username written on your penis to anonymous strangers if they decide to deprive your of your own money because their piece of shit software triggered something.

Hacks can also happen to decentralized exchanges though, hackers can infect the websites these exchanges use and steal your private keys, etc, it has happened, it's simply not too popular because not many people use them. It's also comforting knowing that a mistake wont necessarily ruin you, in a decentralized exchange you are responsible for every move, if you make a mistake, you are fucked, no one will be able to help you or go back in time, you have no support, I doubt big investors will ever use decentralized exchanges, it makes no sense.

I wouldn't class an exchange that runs through centralised hosting and domains as decentralised. It's non custodial but the risks are there as you point out and there's no one who's going to bail you out.

If this form of exchange became bigger it's just another route to hacking, and perhaps an even more efficient one. I wouldn't use one of these. It has to be on chain and via your own wallet.

I believe not if it gives up efficiency and speed. The same debate can be applied here as it has been on "DAPPS". Not everything should be censorship-resistant and trust-minimized.

The track record exchanges have is so dire and hateful that anything that reduces the need to go anywhere near them is worth a little extra ball ache, that's if there is any with a fully developed system.

The case for a decentralised dog walking app is non existent. The case for an exchange that doesn't get hacked, steal your money, freeze you or get shut down is very, very, very strong.

I was thinking more about the active day traders. They would not use an exchange that's inefficient, and slow just for the purpose of "decentralization". Plus hacks, and stolen coins cannot be prevented by decentralization.

Because they're lazy and gullible, they'd rather trust advertising and keep using what they're used to, than to try out something different and new.
I mean, I don't actually agree with @Haunebu, since there will be a point in time when it will be far easier to use atomic swaps than centralized exchanges.

I just think that centralized exchanges will try anything to keep their customers there and they will in part succeed probably.
Just because a lot of people won't know any better.

Eh?

I can think of multiple exchanges that would've wiped me out had I lingered on them. If Id' never had a need to go anywhere near them this wouldn't be an issue.

An exchange is a vastly juicier hacking target than oneself so the odds of coins being hacked or stolen by the exchange are considerably higher when they're under the control of a place with a big fat target on it back.

Agreed on traders. That's a circle that possibly can't be squared.

Yes. Decentralization doesn't assure anything that it's hack-free, and it will only be a matter of how large the pay-day will be. Remember the DAO.

Things will become very interesting when things like this starts to take off, because governments has been open to Crypto currencies, because there are some degree of control, when people trade and convert fiat currencies via regulated centralized exchanges. The moment when they realize that the new atomic swap will reduce the control, it might become a problem for them.

It remains to be seen if people would be willing to adopt LN on a large scale for that to happen and if the problems with the LN can be solved before that happens.  ::)

Probably. Everything will depend on the people's adoption of such exchanges. If they use centralized exchanges more than decentralized ones, then the crypto space will be largely dominated by big corporations. The Lightning Network along with atomic swap prove to be a game changer in the crypto space, but it's limited by the number of people using it. Decentralized exchanges have been on the space for a while, but centralized exchanges are still in the lead.

Most recently, the FATF announced tighter regulations for centralized crypto exchanges. The travel rule will impose greater identity requirements, greatly defeating the purpose of cryptocurrency. After all, Bitcoin was meant to eliminate the need for middleman in the mainstream world. However, the whole crypto ecosystem is becoming largely dominated by greedy banksters and governments. The availability of decentralized solutions provides us with some level of censorship-resistance, but they won't be used as much as centralized ones.

Nonetheless, I believe that someday people will realize the true risks of centralized exchanges, shifting towards decentralized solutions like DEXs and Atomic Swaps. It's only a matter of time before this happens. Just my thoughts ;D

Greedy banksters can only dominate when sheeps don't understand the difference between what's good and what's bad. If we put that aside, we also have to deal with people who just don't care and only aim to use that what offers them the greatest deal of convenience. Banksters are everywhere as long as there is demand for their services, and currently there is plenty.

People won't even shift if decentralized exchanges work almost as good and convenient as centralized exchanges. The difference in convenience and user experience needs to be exponentially better to have people switch to decentralized exchanges.

ah i hate atomic swap
the price they give is too high to buy and too low to sell
so i prefer to use the centralized exchange

I think centralized exchange still needed. Beside for daily trading and making profits, centralized exchangers needed for new project to list in market. The important thing about centralized exchangers is exchanger should comply with government regulation to secure investor funds

it is true that nothing is 100% secure and without hack but decentralized exchanges compared to centralized exchanges are a lot safer because they eliminate a ton of ways that you could lose your money. besides in a centralized exchange the hacker has to target the exchange and steal millions but in a decentralized exchange he has to target thousands of users and hack each of them to steal that much!

p.s. DAO was not a hack, it was an exploit in the protocol of the underlying cryptocurrency!

No,

LN hubs offer a complexity that the majority do not want to even bother with.
The Atomic swaps another layer of complexity on top of that.
No one in their right mind , except super nerds will even bother with it.

Centralized Exchanges offer Easy & Quick access.
So they will be around for all time.

The major complaint is the threat of a hack or exchange owner stealing the funds.
If you are one of those people that leave more than you can afford to lose on the exchange, it is really your own fault.
No different than leaving all of your savings in a Bank that is not insured to your full amount.

Some Traders only use the exchange and never even sync a wallet,
because even simple wallet syncing is more than they want to bother with.  :P

 

It wasn't a "hack"/infiltration, but a real hack like you said. There was a flaw in the code that the hacker used to make an exploit to take advantage of the system.

Lightning is another example of something decentralized that's waiting to be exploited/hacked.

That's certainly true, mate. Centralized exchanges bring a lot of convenience on top of decentralized ones. Even with the inherent risks of centralized exchanges, one could manage to stay safe by never leaving a large quantity of coins on it. For some people, centralized exchanges seem to be the best way to trade from crypto to Fiat or vice versa. However, those who're looking for greater privacy and security would definitely choose decentralized exchanges to perform all of their crypto trades.

The atomic swap feature of the LN, revolutionizes the way people trade from one crypto to another. However, this has technical aspects that aren't familiar for non tech-savvy people. Which is why, geeks or nerds will make better use of said feature. Of course, everything will depend on the developers themselves whenever they create a user-friendly wallet that would allow people to perform an atomic swap in a simple manner.

Still, atomic swaps are not the only solution for trading cryptocurrencies. Which means, that in the future, centralized & decentralized exchanges, as well as, atomic swaps, will co-exist within the crypto space.

Nonetheless, time will tell us whenever atomic swaps will become a success or just another experiment/prototype. Just my thoughts ;D

It will depend on how people swallow the increasing level of KYC and AML policies, because if people continue to not give a damn it's going to be hard for decentralized exchanges to actually gain ground.

We're already at a point where people blindly hand over their personal information and scans of their government issued ID and passport to ICOs just so that they can participate in the crowd sale stage, which is mind boggling.

I really hope that it will change eventually, but thus far we haven't seen much of an indication that people demand a change unfortunately. It has always been greed over security for most people.

There's always going to be a big niche for privacy-oriented people who want to avoid KYC. I strongly believe that's one of the reasons Binance became as big as it did. After Bittrex began implementing mandatory KYC during summer 2017, most of their volume went to Binance.

The main problem right now is usability. Decentralized trading will never compare to the efficiency, liquidity, order types, etc. that centralized exchanges can offer, but the gap between the two can be bridged somewhat.

Unfortunately, those are the facts nowadays. People don't seem to care about their privacy, and censorship-resistance, since they're only into crypto to make money. Because of this sentiment, many centralized exchanges have grown towards new heights giving them an edge over other alternatives within the mainstream world. On the other hand, governments have taken a large influence in restricting the adoption of crypto by enforcing KYC/AML regulations. In the bright side, it helps counteract criminal activity, but it greatly defeats crypto's purpose after all (which is taking out the middleman from transactions).

Still, decentralized solutions will exist, but they will never be as popular or active as centralized ones. Governments will always try to disrupt DEX operations one way or another. We've seen the case with EtherDelta where the SEC has fined the founder of the exchange, by implementing unregistered securities within the DEX. A few decentralized exchanges have taken steps to restrict US citizens (like CryptoBridge and now Bancor) because of tightening regulations. Which means, that our only solution which is censorship-resistant and private, would be doing a P2P exchange from one crypto to another (atomic swaps or other means).

Nonetheless, it's hoped that the LN becomes highly popular within the mainstream world that would change the way we trade and transact our cryptocurrencies for good. Time will tell us whenever governments will adapt towards this new movement, or shut it down once and for all. Just my thoughts ;D

That too. It will depend on the person's specific needs, either for privacy or censorship-resistance. Centralized exchanges, are quite convenient as "bridges" between Fiat and crypto, but they're highly vulnerable against manipulation and hacks. That's why, several solutions like decentralized exchanges and atomic swaps have emerged in order to help bring an alternative choice for people worldwide.

In order for people to adopt the new atomic swaps feature, there needs to be user-friendly LN wallets without a doubt. Considering that the LN is still in its very beginnings, this might take quite some time before it becomes a reality. Which is why, it may be too early to tell if atomic swaps will become highly popular within the future or not.

Nonetheless, atomic swaps might not be able to take over centralized exchanges anytime soon. But, it could serve as an alternative for people looking for a quick-and-easy way to exchange from one crypto to another without middleman. Just my opinion :)

I personally think no, though you're right in the regard that it's going to offer a nice alternative.

Even if you are able to swap between digital assets, there will still be significant demand coming from fiat <-> BTC trades which simply can't be handled on a decentralised platform, or at least, not yet.

You could argue that stablecoins can be used, but not everyone is willing to deal with the risks that are associated with using a token that is potentially based on fractional reserve, so completely replacing traditional exchanges will probably be out of the equation.

We're still early for this, since the LN hasn't even been used at a large scale within the mainstream world yet. Not to mention, it's not production-ready (rather unstable). So, it may take a long time before we experience atomic swaps in mass. In the meantime, we have decentralized exchanges which suit their purpose well from exchanging one crypto to another.

The biggest downside of decentralized exchanges though, is their lack of liquidity and popularity within the mainstream world. Also, it's not widely possible to trade from Fiat to crypto without submitting ID documents (like in the case of OpenLedger). But, in this regard, centralized exchanges are better by a long shot.

Personally, I prefer to use both centralized and decentralized exchanges for my own specific needs. Whenever I want to preserve my privacy, I would use decentralized exchanges or atomic swaps. But if I want greater liquidity, and convenience/ease of use, then I would make use of centralized exchanges.

Nonetheless, it's becoming certain that centralized & decentralized exchanges, along with P2P marketplaces and atomic swaps will co-exist within the future. This brings many alternatives or options for people to choose from depending on their daily needs. Just my opinion :)