If you are interested in cryptocurrencies and blockchain networks, there are so many things that you may know and others that you may not fully comprehend. For most crypto enthusiasts, atomic swap is a term that keeps popping up. Since it sounds like a complicated term, the most logical thing is to ignore it. However, this is a concept that every trader or investor needs to be aware of. We have prepared this simple guide in an attempt to make sense of this concept and give you an idea of atomic swaps.

With a better understanding of the concept, there are so many crypto opportunities that you can leverage on.  There are tons of agencies that allow you to buy and swap crypto assets. This means that you can convert one cryptocurrency like Bitcoin into another one like Ethereum. This may seem like a simple and straightforward process. However, most crypto exchanges tend to charge very high commissions and fees for crypto swapping. With all these complications, most users do not focus on swaps and this is where the atomic swaps come in.

Introduction to Atomic Swaps

Atomic swaps in an innovative technology that allows users to exchange cryptocurrencies between themselves. This is referred to as a peer-to-peer exchange and users can swap crypto tokens that are on different blockchain networks. The main advantage of this form of exchange is that there will be no need for a centralized exchange to validate transactions. Smart contracts are used as security so as to ensure that the swap takes place as planned.

The atomic swaps are executed in total accuracy and the transactions follow the strict codes that have been embedded in the smart contracts. One of the biggest gains for users of atomic swaps is the lower fees. The elimination of an intermediary causes the transaction fees to reduce significantly. Platforms like Bitcoin Billionaire support different crypto tokens and as such, atomic swaps are favorable in such cases.

How Atomic Swaps Work

If you are like most crypto traders, the technical details may not really interest you. As such, we will not waste your time with the technicalities. Let us just look at the basic structure of atomic swaps in relation to how they work. We have already mentioned that atomic swaps are executed using smart contracts as there are no centralized exchanges to regulate atomic swaps. There are two main functions of atomic swaps that you should conversant with:

Hashlock Key: This is a function that ensures that transactions are time-bound. This means that the recipient is bound to acknowledge payments using cryptographic evidence and within a defined timeframe. Failure to meet these requirements automatically cancels the transactions.

TimeLock Key: This feature will restrict a crypto transfer until a defined future block height or time.

With these two critical functions, atomic swaps will be successful or canceled. This is a great concept which eliminates cases of crypto assets being transferred but the recipient does not receive them. As you can see, atomic swaps are ideal for cryptocurrency transfers as they promote P2P exchanges at very low fees. Uses are bound to enjoy greater security, transparency, and security with atomic swaps. Of course, there are certain limitations and challenges with this technology since it is still in the formative stages.

Wrapping Up

Seeing the various milestones achieved by cryptocurrency in the last decade, atomic swaps are designed to catapult the industry to greater heights in the coming months. Crypto transactions will be easier, cheaper, and faster. This is a step in the right direction and goes a long way to validate decentralized ecosystems.