The hassling news that is trending about the exchanges getting hacked and funds getting siphoned off for millions of dollars, the centralized exchanges are getting more prone to attacks and are getting less reliable for the investors. While the news would never stop about the exchanges getting hacked and tokens worth millions getting stolen, someone came up something known as Atomic Swaps.
What are Atomic Swaps?
In simple terms, Atomic Swaps is the transfer of one cryptocurrency to another without any third party involvement. For example, Alex wants to transfer her 5 Bitcoins for Ethereum which would be around 65 Ethereum, she would need someone who would be willing to exchange his/her Ethereum for Bitcoin. When Alex would find someone who would be willing to exchange his/her 65 Ethereum for 5 Bitcoins, then an Atomic Swap can be possible. This is the reason it is known as a swap because essentially you will be swapping the coin you are holding for another.
Both of the party here are exchanging their funds on a trustless network, completely peer to peer without the need of any intermediary wallets or exchanges, both Alex, and the other user would have full control over their wallet keys and the money is transferred to the designated wallets itself as it is a peer to peer transfer.
There are some of the very fundamental differences between a DEX(Decentralized Exchange) and an Atomic Swap application, the feature of Atomic Swap is peer to peer trading that means the funds should be exchanged from sender to receiver and receiver to sender, if there is any storage, involvement of any third party in any form, it won’t be considered as an Atomic Swap.
There are two types of options for investors: The Native server and the Electrum server.
The user when first sets up the BarterDEX account they can either generate a new wallet or they can import an existing wallet from the network. Then the user has to decide which coins they want to work with and on which type of server they want to work on, the native server or the Electrum Server.
If the user chooses to trade in the Native Server, BarterDEX will redirect the user to the local system for running the wallet natively, or you can say locally.
Where would Electrum servers be used?
Suppose Alex doesn’t have BTC but she has got Ethereum in her native wallet, let’s assume she has not yet set up a BTC wallet. And let’s assume Ian already has both an LTC and BTC wallet.
In a scenario like this, Alex would want to import her locally running Ethereum wallet (Native) and use Electrum Servers for Bitcoin (since she isn’t running a BTC wallet locally), which in turn generates for her a BTC wallet that she now owns, without the need to install it locally.
This technology would revolutionize the trading of cryptocurrencies, the centralized exchanges and also this would totally change the perception of the decentralized exchange as we perceive it.
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