What is Atomic Swaps?
Atomic swaps also called as cross-chain swaps, meaning that two different cryptocurrencies that present on different blockchain can be changed atomically without any trusted intermediaries and also there is no exchange/ trading fees involved in this.
Sometimes different businesses that implement this technology can add a small amount of fee structure for providing this service, because these swaps can only be done by some programming line and are not as user-friendly as you would expect. But even if businesses charge you a small fee, it will be safer than trading/exchanging on centralize exchanges
The most surprising thing about atomic swap is that allows people to swap without knowing each-other. It’s another stage in the evolution of decentralized exchange, an attempt to make trading safer, more efficient, and risk-less
Types of Atomic Swaps
There are two kinds of Atomic Swaps.
· On-chain Atomic Swaps
· Off-chain Atomic Swaps
There are some certain conditions while using on-chain atomic swaps,
· Both currencies that are being exchanged must have same hash algorithm
· Both currencies should support time lock contracts
· User need certain programming skills to use atomic swaps as of now
These are the some limitations involved in on-chain atomic swaps. Even though both kinds of atomic swaps are great, Off-chain atomic swaps take this concept to another level as they are nearly instant , private and require almost zero fees.
Why Need Atomic Swaps?
Not all cryptocurrency exchange platform support all coins and using atomic swaps for exchange/trade no party can run-off with the another party’s money before the trade is complete and this is done by the smart contracts concept
Exchanging very large amount of cryptocurrencies by using Atomic swaps is easier and safe compared to depending on cryptocurrency exchange platform. Because in exchange platform, it will be easy for hackers who want to steal the currency and also there will be a high trading fees for transaction
That is why we need Atomic swaps technology to overcome all the above challenges and limitations including eliminate the hacking issues.