Litecoin founder Charlie Lee claims that the Lightning Network can utilize Litecoin as Bitcoin’s sidechain via atomic swaps. Seamless transfers promise to be faster, cheaper and more secure.
Currently, to exchange an altcoin for Bitcoin, traders place orders with cryptocurrency exchanges that match buy and sell orders. A completed transaction consists of the seller, the buyer and a trusted third-party intermediary such as Binance or Coinbase.
Atomic swaps facilitate cross-chain trading without a third-party. For example, Charles can exchange his 10 Litecoin for Brian’s .10 BTC directly, peer-to-peer, without Binance or Coinbase.
Atomic swaps use hash time-locked contracts (HTLCs) to ensure that both parties uphold their end of the bargain once the parties submit the transactions to their respective blockchain. Each party then needs a key to show proof of payment and to release their swapped coins.
The Lightning Network links the two parties through payment channels, allowing real-time transactions that cut out Bitcoin blockchain delays and custodial intermediaries. A growing network of blockchains swapping assets atomically could also eliminate the risks of trading on centralized exchanges that are vulnerable to hacks, attacks and failures.
Crypto’s next level in scalability and speed is also being addressed by the Ethereum development team with Plasma and by the development team of Komodo, an atomic swap token platform – among other projects.
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