Atomic Swaps

Atomic swaps is a smart contract that enables the transfer of cryptocurrencies between two parties without a third party verifying or handling the transaction. Different use cases for blockchains mean different needs and standards in terms of network architecture and technology. Transaction costs can be reduced with atomic swap because no exchanges are required.

Moreover, from a security point of view, atomic swaps are also resistant to fraud because there is no way for one party to extort the other. This is supported by the hash function and Hash Timelock Contract (HTLC) technology. It guarantees that the swap either takes place entirely or not at all.

There are two types of atomic swaps. First, an on-chain swap is the transfer of two cryptocurrencies on two separate networks. The second one is an off-chain swap, which is the transfer of two cryptocurrencies on the second layer of a major network, such as the Lighting Network.