Even though we’re seeing insane volatility in the current price of Bitcoin and other coins, there’s a lot of exciting blockchain news in the space for those looking beyond just a quick buck.
One big development in this space are cross-chain swaps, aka atomic swaps.
The Problem with Modern Coins
The DeFi boom means more and more tokens are now being launched. Unfortunately, the current limitation means that users are limited to the blockchain that their token is developed on, meaning it’s still hard to use your tokens or coins on a different system.
Even though this is supposed to be decentralisation’s time in the limelight, it’s hard right now for one token to interact with another if they run on different ecosystems, making them largely isolated.
This means that if, for example, you have some Ether (ETH) and want to buy some Litecoin (LTC), you would first have to go through an exchange.
Cross-Chain Swaps vs. Crypto Exchanges
Crypto exchanges today are the primary avenue that allows users to trade their tokens or coins. However, this type of crypto asset management in the UK and elsewhere comes at a cost.
You don’t control your tokens, the exchange does. This means that if an exchange is hacked or goes down, you can lose access to your tokens. And, if you’re trading on an exchange that supports a single cryptocurrency or token, this means that you have to deal with liquidity issues.
With cross-chain swaps, there are no third-parties involved. As a result, this means that you no longer have to trust anyone with your asset or tokens, which makes for huge cost savings.
Not only will the process be faster, cheaper, and safer with cross-chain swaps, but it will also be easier to perform.
Cross-Chain Swaps: How Do They Work?
Here’s where cross-chain swaps or atomic swaps come to the rescue. In order to do perform a cross-chain swap, both parties will use a special smart contract.
Here’s the process:
- Two parties agree to exchange their tokens or assets.
- They submit their assets to the smart contract, called the Hash Time locked Contract (HTLC).
- Each party then exchanges their hash keys to verify that the other party has approved and deposited their assets within the specified time frame.
- If both parties make the correct deposit at the time specified by the smart contract, the transaction is executed and carried out. If it’s not, the tokens are returned to their respective owners.
Easy, lightning-fast, and trustless.
Cross-chain swaps will essentially change the way we transact with each other by removing the need for expensive third-parties that often charge exorbitant fees just to trade.
Stay Updated on the Latest Blockchain News
Cross-chain swaps are just one of the many exciting new technologies that are currently in development. Learn how to integrate these new technologies into your investment strategy with Key Coin Assets!
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