Why Atomic Swaps Matter?

Why Atomic Swaps Matter?

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Atomic swap can be understood as a process of swapping two cryptocurrencies where a person holding a type of cryptocurrency exchanges certain amount of it with another person holding another type of cryptocurrency that is worth the amount. In simple words, if a person has cryptocurrency A which is worth $20 while another person has cryptocurrency B which is worth $10, then through an atomic swap, the person with cryptocurrency A will exchange one unit of it with two units of cryptocurrency B.The benefit of atomic swap is that the people involved in the process will be left with new cryptocurrency units at the end of the transaction and these will have the same value as the ones they previously owned. This is a way for people to swap cryptocurrencies without having to pay any transaction fee or rely on any third party for it.
The concept of atomic swap is very exciting as it makes the cryptocurrency more usable by making it liquid. Not only does it make it viable for mass adoption by the general public but also allows the transactions to be made independently and seamlessly. The cryptocurrency community sees this concept as something thrilling that will make the things a lot easier.

Atomic swaps matter, here’s why.

Enough has been said about how the concept of the atomic swap will change the things in cryptocurrency community. There exist other methods of cryptocurrency exchange, so why do atomic swaps matter?

Most importantly, the current methods of cryptocurrency exchange are full of flaws and may result in disasters. For instance, presently, exchange of cryptocurrencies depends on complete trust between the two users involved in the process. Let us assume that a cryptocurrency A is valued at $10,000 and another cryptocurrency B is valued at $500 and a person wants to trade cryptocurrency A to cryptocurrency B for its 20 units. Without using atomic swap, there is a huge risk involved as the person sending the money first is exposing himself to a theft of $10,000.
After the first person sends the money, they have to wait for the other person to send the currency they have agreed upon. This transaction is highly dependent on the trust among the two parties. The method becomes even riskier when the amount involved is relatively higher.

Another method that is being used at present is swapping the cryptocurrencies on exchanges. This method is more reliable than the method discussed above. But, it has flaws too. First and foremost, using the exchanges to swap cryptocurrencies is a quite expensive method. The exchanges involved in the process charge for every single transaction in the process. A person who owns different types of cryptocurrencies and needs to swap them very frequently can end up paying hefty amounts to the exchanges that do currency swaps for them.
Although it is possible to swap the currencies using traditional methods, both the above methods aren’t very good and have significant flaws that need to be removed. Therefore, atomic swaps become very important. A lot of research is going on to make the atomic swap concept more effective so that it can be used more widely than it is being used presently.

 Why Atomic Swaps Matter?
Why Atomic Swaps Matter?

How does it work?

The word ‘atomic’ can be defined as a ‘unitary action or object’ which is not divisible further and is also whole, unchangeable and irreducible. Therefore, an atomic swap would be a transaction that is whole and solid to go through. In simple words, through an atomic swap, it will not be possible for a person involved in it to take the money from a person and not send money in exchange. The atomic swap is complete only when the transaction has occurred in both directions i.e. both the parties have received their money in their desired cryptocurrency.
In an atomic swap, if the transaction doesn’t occur in full, it gets canceled and money involved is returned safely to the accounts of people who own it.

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For doing an atomic swap, the parties involved must agree on transaction value in the beginning. Once the amount has been agreed upon, a hashed, time-locked transaction is created. For instance, taking the previous example, one person has agreed to exchange one unit of cryptocurrency A for 20 units of B. After they agree on that, they sign a copy of transaction using their private keys, followed by the creation of time-locked and hashed transaction. This means only after the specified time has passed, the values that have been exchanged in the transaction could be spent.
If both the parties involved will send the required amount of cryptocurrency, sign the contract with their private keys, only then the atomic swap will be completed. Once it has completed, after a certain amount of time, they will receive their desired currency.

The Bottom Line

The concept of atomic swap is quite exciting and has the capacity to change the way we look at cryptocurrency. However, there are a few challenges that it faces including having to agree on the amount of transaction in advance despite the fact that the value of cryptocurrencies keep fluctuating very frequently and the process is not automatic. QuickX is skilled and ready to use atomic swapping for commercial purposes and is among the first few organizations to understand and apply the concept. Albeit, the number is expected to grow exponentially but at present, not all the people having all kinds of cryptocurrencies can take the benefit of this concept.

The team at QuickX believes that a brilliantly executed idea, atomic swaps have a huge potential to improve the things in cryptocurrency world. The process of converting the currencies has been made quite easier and more reliable by atomic swaps. Having a reliable and faster technology to exchange currencies will increase the possibility for mass adoption of cryptocurrencies. We understand that atomic swap tends to make the use of cryptocurrency frictionless with more people investing into it and QuickX is ready to tackle all the challenges in the process. The concept is at infant stage as of now but has a quite promising and exciting future. It will gain momentum when more cryptocurrencies will begin to support it.

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