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ATOMIC SWAPS - The fuck is that?

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@ocupation
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What are atomic swaps and why it matters?

I assume most of you guys remember when steemit talked about implementing atomic swaps between two different platforms in order to bridge the gap between different communities. Regardless of how it all ended, atomic swaps are generally viewed as beneficial tool that has the power to connect. There is a problem though, a lot of tribalism around different communities, and that is the biggest issue we are currently facing. It seems that we don't want to help each other, rather contrary, the same goes with steem and hive. Once we establish how retarded we behave, maybe, and just maybe we'll find a way to become mainstream. There is enough room for everyone.

Without further ado Let's dive into it.

Atomic Swap

Atomic swaps are relatively new discovery with the potential to disrupt the way we transfer value across the internet, thus revolutionize transacting per se.

Given the fact that trading can and is sometimes annoying and time-consuming, especially if one decides to trade tokens which aren't supported by big exchanges. the atomic swap might be a good solution.

For instance, you have RC20 token and you want to swap it for let's say bitcoin. The common practice would be swapping for its native currency, which is ETH, and afterward utilizing exchange to buy bitcoin. So you actually have to trade twice, which makes security questionable and frustrating.

In simple terms, atomic swaps enable people to trade directly through their wallets, thus avoiding third-party exchanges during the entire process. It may sound not so important but I assure you it kinda helps in everyday activities.

To give a very simplistic explanation. Two parties who are going to engage in atomic swaps decide on a shared secret. The two parties will share their cryptos if and only if their secrets match. So, this way, if somebody else barges into this exchange, they won’t be able to get their hands on any of the coins because they will not know this secret.

In order for such transactions to take place, there is a Hashed Timelock Contracts( known as HTLCs) which are responsible for securing the transactions and keeping the secret safe.

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.

So there are multiple advantages of atomic swaps and I will highlight only the most important ones.

First of all, it removes third party interference which is quite important due to a high risk of an exchange getting hacked. It may sound too radical but once you start exchanging a lot of money, security becomes your primary concern.

Direct wallet-to-wallet trading epitomizes decentralization in its purest form. Exchanges are constantly targeted for regulation purposes which makes the whole trading process increasingly centralized.

LIMITATIONS

As always, there are pros and cons to every new technology, especially those who are considered to be in its early stage.

Both blockchains are expected to have a hash algorithm that is inherent and common to both of them, otherwise, they won't be able to communicate properly. Moreover, both blockchains have to possess the ability to execute HTL.

To be honest I don't know if steem has those abilities and what happens in case it doesn't. I assume it requires a hard fork, but I might be wrong about it.

The solution seems pretty straight forward and is the best way to increase interest between seemingly different communities. After all, we share common goals, which is to increase the activity and liquidity of our digital asset, which will eventually have an impact on price itself.

Stay connected.