Atomics Swap, also known as cross-chain trading, is a smart contract technology that allows anyone to make transactions with one another wallet-to-wallet without a third party service like crypto exchanges. This is the key to solve security issue of crypto transactions. While most exchange platforms store their data in a centralised server, connected through the internet, Atomic Swap, with a decentralised system, secures all transactions. The user will have full control over their private keys and ownership throughout the process without any external involvement.
Atomic Swap can be used to trade between separate blockchains of different cryptocurrencies or even conduct off-chain, away from the main blockchain.
Atomic Swaps uses Hash Timelock Contracts (HTLC) with an aim to protect every transaction. The HTLC is a time-bound smart contract between parties that must be verified by both sides. Basically, both sides need to acknowledge receipt of funds within a specific time frame using a cryptographic hash function. If both parties cannot complete this in time, the transaction is voided. To make sure there are no counterparties when the transaction is not complete, the funds will not be exchanged.
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