What Is an Atomic Swap?

An atomic swap is the exchange of one cryptocurrency for another cryptocurrency without the need for a trusted third party. Instead, two different blockchains interact directly with each other.

On each blockchain, a contract between two parties is created. Each party uses its private key for signing its version of the transaction. Upon the completion of the transaction, the exchange is carried out instantly, with no transaction fee and with no need for an intermediary. If the parties do not receive their coins, the funds are sent back to where they belonged.

In the future, this technology will be able to completely replace the centralized exchanges. There are some fundamental requirements for a cryptocurrency before it can successfully support atomic swaps. One such requirement is the implementation of the Lightning Network.