Cross-chain atomic swaps have been of great interest to cryptocurrency users for some time now. In most cases, these swaps are performed between different blockchains using old-school techniques. Lightning Labs has announced it has come up with a new way to facilitate Lightning cross-chain atomic swaps between Bitcoin and Litecoin. It’s a major development, to say the very least.
A new era of Cross-chain Atomic Swaps
It is always interesting to see how cryptocurrency enthusiasts and developers approach the concept of exchanging value in a decentralized manner. We are still a far way off from performing decentralized exchange solutions in the world of cryptocurrency. In fact, that may never come to fruition in any significant way unless newer technologies are adopted in the long run. Lightning Labs claims it has come up with such a solution.
More specifically, the Lightning Labs team has performed a Lightning cross-chain atomic swap between Bitcoin and Litecoin. This particular test took place on both testnets, rather than the main blockchains. Although that may seem like taking a step back, it is important to test this technology first rather than “bork” it on the mainnet right away. Both Bitcoin and Litecoin have implemented SegWit, making both networks capable of performing these atomic swaps.
Being able to swap between different cryptocurrencies is a pretty significant development, to say the very least. If this technology ever gains sufficient traction, it will effectively render centralized exchanges useless in the long run. Being able to exchange various coins without intermediaries, excessive fees, or the need for an order book is huge. A fair few developers are working on bringing this technology to market in the very near future.
This marks the first time we have seen cross-chain atomic swaps related to Lightning technology. A high-speed decentralized network for anonymously sending payments was one of the main reasons why Lightning Labs got involved with all this in the first place. Moreover, traditional on-chain atomic swap solutions will not facilitate instant payments whatsoever, as there may be delays of up to one full hour. That is not acceptable by any means, but there is no other solution readily available as of right now.
Lightning Network technology creates a few new opportunities when it comes to cross-chain atomic swaps. For one, the Lightning Network boasts a special payment type referred to as Hashed Timelocked Contracts. They allow Lightning payments and even atomic swaps to be performed in a very different manner from regular on-chain swaps. These contracts allow any party to cash out at any time as long as they broadcast their swap commitment transactions to the blockchain.
With Lightning payments, both parties to a transaction will effectively become sender and receiver for the same atomic swap. All users must have a payment channel active on each chain involved in said swaps. In the case of the Lightning Labs test, the users needed access to both the Bitcoin and Litecoin testnets. As a result, every such atomic swap will either succeed or fail instantly. It is a major development in this area, although a lot of internal testing still must take place over the coming months.