Stably Blog

Understanding Atomic Swaps

Crypto for Crypto aye?


An image depicting an atomic swap.


Coin for Coin?

We take for granted the fact, that we, for the most part, have cash that we can readily swap for other foreign currencies. And that there are financial institutions in place that enable this exchanging of fiat-currencies. But how about various cryptocurrencies that are spread across multiple blockchains and run by different protocols?

The idea of swapping each cryptocurrency for another becomes more difficult when we take into account the lack of interoperability of many blockchains. Interoperability is simply the ability of a system or network to operate or harmonize with another.

When money becomes digitized, in the case of cryptocurrencies, the platform and protocols that they use are often different and not compatible. Which is why many developers aim to build code that bridges this gap.

The main cause of this lack of interoperability is a difference in the interest of the developers. This difference in interests can lead each cryptocurrency project to develop their own unique platform in accordance with the interests of the team. This unique platform will reflect the thought-processes of the team and the use cases that they decided to focus on.

Atomic Swap

An example of an atomic swap would be when I trade say, 50 XRP for the equivalent amount of Bitcoin across two blockchains without the need for a trusted third party.

Atomic swap → “a feature in cryptocurrencies that allows for the exchange of one cryptocurrency for another cryptocurrency without the need for a trusted third party.”

Atomic swaps enable cryptocurrency investors to cut out the middleman and take more control over the process by which they exchange cryptocurrencies.

Conclusion

Atomic swaps can be very helpful when dealing with two blockchains that aren’t connected. Many blockchains will most likely seek to add this feature, which will allow them to better serve individuals within the cryptocurrency community. The faster that transactions can take place and be finalized, the faster that this ecosystem will mature and expand.


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