Litecoin is a popular peer-to-peer cryptocurrency and is one of the top market share holders of the cryptocurrency market. It’s one of the most well-known cryptocurrencies, and is technically, nearly identical to Bitcoin.
In order to take Litecoin forward in terms of functionality, The Litecoin Foundation has announced a partnership with blockchain developers X9. One of the aims of this partnership will be the introduction of ‘one-click’ atomic swap capability to the Lightning Network. X9 are leading developers in the blockchain and decentralization domain.
The atomic swap is going to be just one goal of this partnership, with Litecoin Foundation hoping to improve the maintenance and debugging of LTC and developing new technologies for its Lightning Network.
X9 do not specialize in a particular blockchain, and are instead ‘blockchain-agnostic’, meaning they can work on different blockchain protocols.
Of course, the real headline-grabbing portion of this announcement is the possibility of ‘one-click’ atomic swaps coming to the Lightning Network. If you’re not familiar with this game-changing technology, let us explain.
‘One-click’ Atomic Swaps
Put simply, atomic swaps use smart contracts to facilitate the exchange of different cryptocurrencies/tokens between two parties without the risk of one party pulling out of the trade.
There is no need for ‘trust’ between the two parties, and atomic swaps happen without the interference/need of a third party or escrow manager. Thanks to this technology, there is no risk of losing your cryptocurrency as there will be no transfer of tokens before the complete ‘swap’ is carried out.
The term ‘atomic’ is used here because the trade will either happen, or it won’t. There is no middle ground involved here, as the tokens will be swapped as a whole.
Anyone who has bought or sold Bitcoin will be well-aware of the trading fees that go along with it. With mass adoption of the atomic swap across different cryptocurrencies and blockchains, those fees could be a thing of the past.
Atomic swaps enable cross-chain cryptocurrency trading (atomically of course) without any third-party and there are trading fees involved. An important point to note regarding atomic swaps is that as of now, they’re not very user-friendly. You have to be really technically proficient to carry these out. As such, atomic swaps will be offered as a service by businesses that implement this technology. Thus, it’s fair to assume that there will be a small fee associated with these, but that should be considerably lower than the trading fees we’re used to.
Cryptocurrency Needs Atomic Swaps
Atomic swaps will completely change how cryptocurrency trading is done, and for the better. The technology can be utilized by anyone, no matter the size of the trade.
Let’s take an example of a cross-chain crypto trade. Assume that you have 500 BTC but would like to trade it for 25,000 LTC. Traditionally, you’d have to either use the services of a centralized exchange, which would mean paying trading fees. Or, you could find someone with 25,000 LTC and ask them to trade. The only thing is that you can’t trust someone to complete this transaction. With atomic swaps, this fear is taken care of as your amount will be swapped as a ‘whole’, and not in fractional amounts.
This would be greatly beneficial to cryptocurrency technology as a whole, it is still plagued by fears of hacks and deception, thanks to some high-profile hacks at major exchanges.
Atomic Swap Limitations
Even though atomic swaps have already been implemented (Decred and Litecoin in 2017), there are some limitations for on-chain atomic swaps:
- Exchanged currencies must have the same hash algorithm
- Exchanged currencies should support time-lock contracts
Of course, these limitations pose a threat to mass adoption of atomic swaps. However, cryptocurrency technologists are at work on getting around them. No major Litecoin wallet supports atomic swaps yet. Hopefully, in 2019, this will change.
Solutions like off-chain atomic swaps by Bitcoin Lightning network are being developed with the purpose of overcoming challenges faced by on-chain atomic swaps.