Atomic Swaps

Written by Jeff Kuan

Introduction

Atomic swaps are trades of made directly from one user to another without the need for intermediaries, enabled through smart contracts. The first atomic swap occurred in September 2017, when an atomic swap between Decred and Litecoin was executed.

There are three main benefits to atomic swap trading over traditional trading. First, users hold their own private keys throughout the entire transaction process. As a result, atomic swap trading is more secure than trades executed through third parties, such as centralized exchanges. Secondly, atomic swaps are much cheaper than trading that occurs on centralized exchanges. In general, exchanges charge a per transaction fee, whereas the only cost associated with atomic swaps are an order-taker transaction fee. Lastly, atomic swaps allow users to trade between a variety of tokens. For example, decentralized exchanges enable users to trade between bitcoin protocol-based and Ethereum-based ERC-20 tokens. This allows users to accept any cryptocurrency that supports atomic swaps and instantly exchange it for another cryptocurrency.

Suggested Reading

Atomic Swaps Simply Explained: How to Swap Cryptocurrencies without a Middleman by Mitchell van der Hoeff

The Non Technical Guide to Atomic Swaps by 99bitcoins

If there is anything you'd like to add or change, you can tweet your feedback at @messari_crypto or email [email protected]

Let us know what you loved about the report, what may be missing, or share any other feedback by filling out this short form. All responses are subject to our Privacy Policy and Terms of Service.