It’s amazing how new things are being created or continuously improved in the world of cryptocurrency. Technology in crypto is high-speed, it seems you are finishing learning about something, and immediately there is a new application created that you also must learn about. Cryptocurrency is fascinating; the technology on which it runs and concept behind it. Crypto is also very new compared to other financial entities; thus it is continuously upgrading and becoming better. There are so many people in the community or enthusiast that are contributing to making crypto better than it is; with projects like lightning network or mimblewimble.
I’ve written a couple of times how the foundation of cryptocurrency is to eliminate third-party interference in order to make a transaction occur. Although crypto will run on the network regardless of how many governments or bank entities are against it, even though it runs online, there is still third party interacction. This third party are crypto exchanges; these exchanges I believe are well accepted within the cryptocurrency world, but I've always thought they are the true banks of crypto; hopefully they won't run things like regular banks do.
Nonetheless, a few days ago I found out about Atomic Swaps. According to Investopedia, “Simply, atomic swaps require both parties to acknowledge receipt of funds within a specified timeframe using a cryptographic hash function. If one of the involved parties fails to confirm the transaction within the timeframe, then the entire transaction is voided, and funds are not exchanged. The latter action helps remove counterparty risk.” Many updates are being made within the cryptocurrency world, and I believe that in the majority they are all pointing at scalability problems within the blockchain and solutions for the user to take complete control of crypto transactions without the need of a third party.
“Atomic swap is a peer-to-peer exchange of cryptocurrencies from one party to another, without going through a third party service like a crypto exchange. During this entire process, the users have full control and ownership of their private keys.”
It works: “On September 20, 2017, Decred and Litecoin did the first known successful implementation of the atomic swap.”
How? “They can either be directly executed between separate blockchains with different native coins or, they can also be executed via off-chain channels that are offshoots of the main blockchain. Atomic swap is also known as cross-chain trading.”
Does this mean exchanges have their days counted? Or should this be a wakeup call towards centralized crypto exchanges? In the field of technology you must continuously be upgrading into newer and better things, and particularly in crypto; you must move fast. Nowadays using an exchange is a must; this can eventually change with such an invention like Atomic Swap.
Nonetheless, like every new technology, they all go through phases; implementation and adaptation. Blockgeeks has a great article about Atomic Swaps where they explain it in detail. They point out three conditions that have to be met in order for an Atomic Swap to occur; the cryptocurrencies must have a hash algorithm which is inherent to both of them, both the cryptos must be capable of initiating hashed timelock contracts and must have specialized programming functionalities. These conditions will limit the coins that can actually meet these requirements.
Keep calm and wait for a white paper. I will not be surprised if suddenly someone drops a white paper on Reddit or any platform where they have a solution to this.
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