Litecoin creator Charlie Lee says he’s performed the first LTC to BTC “atomic swap”. This technology paves the way for swaps between different digital assets without exchanges — bypassing both existing centralized services, and regulators.
Lee announced on Twitter yesterday that he’d sent 10 LTC from a litecoin address, and received 0.1137 bitcoin. His trading partner got the LTC. They did this by using an atomic swap via a hashed time-locked contract (HTLC), which holds funds for later release if certain conditions are met.
— Charlie Lee [LTC] (@SatoshiLite) September 22, 2017
In the case of atomic swaps, the sender and receiver would agree on a conversion rate and code the contract. HTLCs have been possible using Bitcoin’s scripting language in the past, but cross-chain atomic swaps were mainly theoretical. (There have reportedly been a few prior experiments.)
Some believe atomic swap transactions only became possible after Bitcoin (and the swap chain) adopted SegWit, to eliminate transaction malleability. However that’s not necessarily the case. The atomic swap concept was first mentioned in 2013, long before SegWit — and SegWit itself doesn’t eliminate transaction malleability.
From my understanding this does not require SegWit and actually didn't use SegWit.
— kk⚡??????? (@KevinKelbie) September 22, 2017
There’s a way to go before everyday cross-blockchain payments and completely decentralized exchanges become a reality, though. Right now they’re only possible between a very limited number of coins — Bitcoin, Litecoin, Decred and Vertcoin. Developers will need to create tools to enable swaps between other assets.
If it’s a popular idea, though, that development will happen swiftly. Other aspects of cross-chain transactions will need to be streamlined too, such as how long each swap contract should last, number of confirmations required, and what to do if funds aren’t properly claimed.
Others have claimed smart contracts, e.g.: Ethereum, can also handle the task — though a full-blown smart contract would be more complex, and incur a network cost.
Once perfected, though, the technology would allow for seamless and fast direct trades between cryptocurrencies and other digital assets. Current services, even account-less exchanges like ShapeShift, are built on centralized platforms and could potentially be shut down. Atomic swaps require only the two blockchains and a coded swapping tool.
Does the idea of atomic swaps excite you? Let’s hear your thoughts.
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