Atomic Swap in crypto conversion

[Charles-Tim]

Table of contents
Introduction to Atomic Swap/atomic cross chain trading.
How does atomic swap work
Hash and preimage
The all-or-none feature
Advantages of atomic swap
Disadvantages
Decentralized exchanges competing with centralized exchanges using atomic swap
Conclusion

Introduction to Atomic Swap/atomic cross chain trading
The atomic swap also known as atomic cross chain trading was introduced on the BitcoinTalk forum by Tier Nolan in 2013. Exchanging trading platforms are really important in cryptocurrencies  trading but with the introduction of atomic swap, it is very possible to trade (convert) cryptocurrencies  without the use of exchanges. Atomic swap is a peer-to-peer crypto trade between two people without the need of any third party.
 As an illustration, Mr A may have bitcoin and decide to convert it for another coin with Mr B without the need of exchanges. This can be done using atomic swap technology.

How does atomic swap works
Atomic swap uses a smart contract called Hashed Time Lock Contracts (HTLC) in which the hasklock locks coins in a digital box until an access code is revealed. The initiator of the trade will have the access code called preimage and only him knows the code.

For example, Charles is the initiator, he has bitcoin and want to trade it for litecoin with Tim.
Charles will put the bitcoin in a digital box and lock it with the hash lock. After, he will send the bitcoin locked in a box to Tim. Tim will receive the box but will not be able to unlock it until Charles unlock the litecoin box that Tim will send. So, Tim will lock litecoin in digital box too using Charles hashlock and send the litecoin locked in the box to Charles. After Charles receive the litecoin locked in the box, neither of them can get access to the coins because it is in locked boxes but Charles will use the access code to unlock the litecoin and immediately, Tim bitcoin box will unlock too. So, it is very safe to use.

Hash and preimage
The lock on the boxes is called hash as explained above while the access code/passcode that Charles used to unlock the box is called preimage. This helps in the protection of the cryptocurrencies  in which the two party transactions are secure.

The all-or-none feature
Immediately the initiator initiate the deal, there will be a time range that the two box should be unlocked with the access code. If this time range is over, the deal is automatically canceled. It is possible that the initiator can set the time range.

Advantages
Decentralization, no need for any third party like exchanges. Just only the initiator and acceptor are involved.
It support off-chain and on-chain swap. The off-chain swap means using lightning network for the swap.
It is a feeless trading, only blockchain fee is required.
Scalability and interoperability makes atomic swap a better option
Process is less likely to be attacked by hackers compared to exchanges. It is even said to be hack proof.
They are not regulated by governments and can not be subjected to government regulations

Disadvantages
It is not novice-friendly and also not user-friendly to an extent.
It is not well establish yet and the technology need more development for making trading between two people.
It might still be able to be attacked by hackers but it will be very hard.
Cryptocurrencies supported must support Hashed Time Lock Contracts and the cryptocurrencies must have the same hash algorithm for on-chain swap.
Only few wallets still support swap order.

Decentralized exchanges competing with centralized exchanges
The main reason for the adoption of atomic swap was to create an alternative swapping of cryptocurrencies in which exchanges are not going to be involved, only two people are to be involved in the crypto exchanging. But, later, non-custodian exchanges using atomic swap to compete with non-custodian exchanges. This is a great advantage for the more adoption of atomic swap and this makes crypto trading a lot easier on some wallets.

Conclusion
The atomic cross chain trading makes cryptocurrencies more decentralized, but need to be well adopted. It makes peer-to-peer trading easy between two people. But, getting more adopted as non-custodian exchanges are using it as a means to help in exchanging cryptocurrencies.


https://hackernoon.com/atomic-swaps-simply-explained-how-to-swap-cryptocurrencies-without-a-middleman-6cd29680c32e
https://99bitcoins.com/atomic-swaps/
https://www.forbes.com/sites/lukefitzpatrick/2019/09/02/a-complete-beginners-guide-to-atomic-swaps/amp/
https://steemit.com/cryptocurrency/@cryptowarrior88/atomic-swaps-basics-advantages-and-disadvantages

[1714792492]

1714792492

[1714792492]

1714792492

[1714792492]

1714792492

[1714792492]

1714792492

[JeromeTash]

This post could also do with some examples of atomic swap platforms

It is a feeless trading, only blockchain fee is required.

Kind of disagree here.
Sometimes the fees spent in atomic swaps is far more than one would spend if they carried out the exchange themselves not forgetting more losses incurred by the trade due to large spend in the atomic swap platforms.

Atomic swap is a peer-to-peer crypto trade between two people without the need of any third party.
As an illustration, Mr A may have bitcoin and decide to convert it for another coin with Mr B without the need of exchanges. This can be done using atomic swap technology.

Can you really carry out an atomic swap without a third party platform to facilitate the swap?
The explanation is quite vague. Someone can mistake Localbitcoins to be an atomic swap platform based on it.

[Charles-Tim]

This post could also do with some examples of atomic swap platforms

It is a feeless trading, only blockchain fee is required.

Kind of disagree here.
Sometimes the fees spent in atomic swaps is far more than one would spend if they carried out the exchange themselves not forgetting more losses incurred by the trade due to large spend in the atomic swap platforms.

Atomic swap is a peer-to-peer crypto trade between two people without the need of any third party.
As an illustration, Mr A may have bitcoin and decide to convert it for another coin with Mr B without the need of exchanges. This can be done using atomic swap technology.

Can you really carry out an atomic swap without a third party platform to facilitate the swap?
The explanation is quite vague. Someone can mistake Localbitcoins to be an atomic swap platform based on it.

About the fee, I said it is feeless that only blockchain transaction fee will be diducted. I did not not say no fee will be charged. I only said not extra charges for making the transactions aside the blockchain fee.

Secondly, do you know about the Komodo. They are the most successful in atomic swap innovation. You can initiate an order and they will find a match for you. Check the link below to watch a video example.
https://m.youtube.com/watch?v=zXcyyojx97g

You can read more about komodo atomic swap on the link below
https://komodoplatform.com/atomic-swaps/

Also, it is in my article that non custodian exchanges are now using it in which someone can easily swap cryptocurrencies  on some crypto wallets but that does not mean there is no real atomic swap that can connect two traders to swap cryptocurrencies but non custodian exchanges contributed a lot to the success of atomic swap.

[coupable]

Although it's technically possible, but it still need a third part entity to install it. Afaik, most wallet's developpers are not promised by this feature and some of them suspended this option after trying it; i can take the example of the "swap" option in MEW for ethereum where it was possible to swap ether into bitcoin.. I don't remember when this function has been disabled, or why it was disabled, but surely for one of the disadvantages mentioned above.
Moreover, the swap option becomes more used by some of the centralised exchanges like Shapeshift. I would like to know if the examples i have mentioned used the swap technology as technically described by op. Does there any improvement in the progress of this technology?

Thank you op, this is a great topic. But doesn't belong to bigenners board .

[bitmover]

We still don't have a large exchange or software doing atomic swaps.

Actually, there is a lot of confusing and misinformation regarding this topic, as many people think and advertise services like Shapeshift or Changelly as Atomic Swap, which aren't

Most of those swap services are centralized, and the conversions are mostly automatic, however some of them are manually done.

Those services are cheaper only for small quantities (as there is no exchange withdrawal fee), but the spread (conversion rate) is usually much worse than on exchanges. So, for high volumes, it is better to use a good exchange, like Binance.

[Charles-Tim]

We still don't have a large exchange or software doing atomic swaps.

Actually, there is a lot of confusing and misinformation regarding this topic, as many people think and advertise services like Shapeshift or Changelly as Atomic Swap, which aren't

Most of those swap services are centralized, and the conversions are mostly automatic, however some of them are manually done.

Those services are cheaper only for small quantities (as there is no exchange withdrawal fee), but the spread (conversion rate) is usually much worse than on exchanges. So, for high volumes, it is better to use a good exchange, like Binance.

You are right that atomic swap is different from shapeshift and changelly, normally it was created to make exchanging to occur between two people with only blockchain deduction fee to be charged.

[bitmover]

You are right that atomic swap is different from shapeshift and changelly, normally it was created to make exchanging to occur between two people with only blockchain deduction fee to be charged.

No, it isn't made for transactions between two people.

I have done a lot of exchanges already using those services. Those services are big exchanges customers.

I have made swaps using some of those services and I have already received coins even from Binance to my wallet.

They are centralized services which charge a fee to make transactions for you. They are not p2p

[20kevin20]

No, it isn't made for transactions between two people.

I have done a lot of exchanges already using those services. Those services are big exchanges customers.

I have made swaps using some of those services and I have already received coins even from Binance to my wallet.

They are centralized services which charge a fee to make transactions for you. They are not p2p

Welcome to the era of false information. I'm still waiting for a gov to pop up and present their country's digital currency and compare it to BTC. I'm patiently waiting for it because I know they will do at least a subtle comparison of it with BTC or some other cryptocurrency.

I am wondering why these exchanges are allowed to present themselves as p2p or atomic-swap exchanges when they have absolutely zero relationship with any of the two? I've honestly almost been convinced months ago that Changelly is doing atomic swaps until I've done a bit more research.

Fuck them all with their bullshit, man..

EDIT: wanted to place a link here to Changelly's own words about themselves being an atomic swap exchange but I can't find any apparently. I am more than sure they've been advertised as atomic swap DEXs in some articles though..

EDIT 2: There you go. While not directly implying they're using atomic swaps, this article can give you the false impression of it.. Put this next to the fact that they advertise themselves on their homepage as "noncustodial" and here you have the perfect combo for a false impression of their exchange.