Cross Blockchain Trades? Lightning Gives New Life to Atomic Swaps
Litecoin for vertcoin anyone? Bitcoin for litecoin?
Say, you want to trade one cryptocurrency for another. How do you do that? You can either find someone you know and trust to do it in person or, a more common scenario, you go through a centralized exchange.
Ultimately, the latter involves risk, because it means taking your funds off the blockchain and putting them in the hands of an unknown third party. If the exchange fails, or simply decides to hold on to your money, for whatever reason, you are out of luck.
But Lightning Network, an off-chain scaling solution originally intended for bitcoin, is setting the stage for a decentralized option – one that does not require a third party – called atomic swaps.
Also known as atomic cross-chain swaps, the technology essentially allows two people holding tokens on two different blockchains to trade directly – and instantly – without the risk of one party running off with the other’s money before the trade is complete.
That is where the word ‘atomic’ comes in. It means that either the trade happens in its entirety, or it doesn’t happen at all. So, if a Lightning node goes offline or Bob reneges on his end of the deal, everyone gets their money back.
So far, so good. But there is a catch.
In order for atomic swaps to work, Lightning has to be up and running on at least two different blockchains. Right now, it is just starting on one: litecoin. But, the hope is, it will be running on multiple chains soon.
As it stands, several development teams are currently testing their implementations of Lightning on the litecoin blockchain. Further, SegWit (the protocol upgrade that is a prerequisite for Lightning) has been activated on a second blockchain, vertcoin, opening the doors to Lightning on that chain as well.
According to Charlie Lee, the founder of litecoin, who is committed to atomic swaps, all that is left is to get Lightning fully operational on litecoin, and then begin testing it on vertcoin. Once those steps are complete, we may see the the first atomic swaps as soon as this year.
Certainly, that is the idea Lee has been kicking around for some time. He wrote about his plans for atomic swaps in a blog post back in January. And, the 2017 litecoin roadmap clearly specifies a plan for atomic swaps between litecoin and vertcoin.
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