An atomic swap, also known as atomic cross-chain trading, is a type of trade that allows two parties to exchange cryptocurrencies or other digital assets without the need for a trusted intermediary. The process uses smart contracts on different blockchain networks to ensure that the trade is completed in a decentralized, trustless manner.
In an atomic swap, the two parties agree on the terms of the trade and then create a smart contract on their respective blockchain networks. The smart contracts are designed so that the trade can only be completed if both parties fulfill their side of the agreement. For example, if party A sends cryptocurrency A to the smart contract on blockchain A, and party B sends cryptocurrency B to the smart contract on blockchain B, the smart contracts will automatically release the funds to the correct recipients.
The key feature of atomic swap is that the trade is guaranteed to be completed in full or not completed at all, similar to atomic payments. This eliminates the risk of one party sending their funds and the other party not fulfilling their side of the agreement.
Atomic swap allows two parties to trade cryptocurrencies or digital assets without the need for a centralized exchange, reducing counterparty risk and increasing the privacy of the transaction.
This page was last updated on January 13, 2023.