Decentralized Exchange & Atomic Swaps

ka82 (43)in #cryptocurrency • 7 years ago (edited)

Decentralized Exchange

A decentralized exchange is basically the same as centralized exchanges except that you aren't required to create an account and disclose your personal information. Unlike centralized exchanges there's no single point of failure in decentralized exchanges. One of the first & fully decentralized crypto currency exchange is EtherDelta. To learn how to use EtherDelta check this post.

Atomic Swaps

On September 20th, the first atomic swaps were executed between 2 altcoins, Decred (DCR) and Litecoin (LTC). This is a hugely important function as it allows 2 parties (who do not know each other)in different blockchains to exchange their coins without an intermediary.

"The problem of atomic cross-chain trading is one where (at least) two parties, Alice and Bob, own coins in separate cryptocurrencies, and want to exchange them without having to trust a third party (centralized exchange).

A non-atomic trivial solution would have Alice send her Bitcoins to Bob, and then have Bob send another cryptocurrency to Alice - but Bob has the option of going back on his end of the bargain and simply not following through with the protocol, ending up with both Bitcoins and the altcoin." [1]

The atomic swaps uses Hashed Time-Locked technology (HTLC) to implement a sort of conditional payment protocol in Bitcoin & Altcoin ecosystem. It allows the receiver to generate a cryptographic proof of payment before the deadline of the swaps, and sending a secret number to the sender so that the sender uses to unlock for his receiving coins.

This conditional protocol can be/is being used by online market places which are built on top of blockchain, connecting buyer and seller and making sure the buyer receives his/her product before releasing the fund to the seller. For further information on online marketplace based on blockchian check 1) https://www.openbazaar.org & 2) syscoin.org

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#bitcoin #technology #exchange #crypto