After the start of Bitcoin activity, the number of blockchains gradually increased and the need to exchange tokens between different blockchains became more felt. Atomic swap is known as a solution for direct and unmediated transfer of cryptocurrencies between blockchain networks.
In the first years of the emergence of blockchain technology, Bitcoin was the only project that worked as a cryptocurrency with its own blockchain, and other blockchains had not yet been born, so there was no need to think of a special technology to transfer coins between networks; But as other projects and cryptocurrencies were found, the only way to exchange tokens was to use exchanges. First, centralized exchanges and then various types of decentralized exchanges were created so that users could easily exchange their bitcoins for example with Ethereum, Tron, or any other cryptocurrency.
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The problem with centralized exchanges is that they have control over users’ assets, and decentralized exchanges also suffer from low transaction volume. So the need to invent a technique to transfer coins directly between different blockchains was felt, which is called atomic swap . In this article, we will examine and analyze the fascinating and complex issue of atomic swap. Stay with us.
What is atomic swap?
“Atomic Swap” is an interesting technology or technique for moving cryptocurrencies in different blockchains without the need for intermediaries such as exchanges. As you know, blockchains have their own isolated environments and cannot easily communicate with the outside world and other blockchains.
For example, if you have some Bitcoin, you cannot use it directly in “decentralized finance” or “DeFi” projects that operate on the Ethereum platform. Because the “Smart Contracts” of such projects are coded in a different language than the Bitcoin blockchain. Of course, there are solutions such as bundled tokens, such as WBTC, which are equivalent to Bitcoin and can be worked with; But the main problem remains.
The atomic swap process, also known as “Cross-Chain Trading”, works on the basis of smart contracts and, if implemented correctly, allows users to make atomic transactions between their personal wallets. . It means, for example, to send some Ethereum to a Bitcoin address; So AtomicSwap wants to enable peer-to-peer (P2P) transactions between different blockchains.
Many developers are looking for a suitable solution to implement the concept of cross-chain exchange. Mr. Tier Nolan first talked about the possibility of making such a protocol in 2013. Even Mr. Daniel Larimer (the same adventurous founder of the EOS project) introduced the “P2PTradeX” protocol in 2012, which can somehow be considered a solution for atomic exchanges.
In the following years, the developers of Bitcoin, Litecoin, Kudomo and Deckard were the most active in this field. The first inter-chain transaction appears to have happened in 2014; But it was the first time in 2017 that they were able to perform such a transaction between LTC/BTC and DCR/LTC currency pairs, and the news of it was publicly published in the world.