Ever since Bitcoins birth, pirates have been looking for different ways of sending digital currencies to one another (and the dream of Cross-chain atomic swaps ~A.K.A. ARRRtomic.) Leading to the idea that cryptocurrencies have value, and that they might someday be used to pay for goods and services — something that is already a reality today, albeit in limited form.
Soon enough, other coins started emerging as well, and crypto trading became a thing. Crypto exchanges started to appear, promising a simple method of swapping coins and allowing traders to become owners of specific cryptocurrencies.
However, for all the benefits that the exchanges have brought, such as the ability to exchange your Bitcoin for someone else’s Ethereum or some other crypto — they still have a few downsides. One of the most significant issues is the fact that when you deposit your coins into the exchange’s wallet — you don’t own them anymore. Not really.
The fact is that when you have your coins in your wallet — you are their only owner. No one else can access them without your private key, and if you don’t share it with anyone — nobody can know what it is. Unfortunately for many, this is not the case with centralized exchanges. The exchanges are the ones that own the private keys of their wallets, which are the same wallets in which you have deposited your coins.
By all means, your funds are not your own. If you need proof, think of hacking attacks. Through no fault of your own, you might lose all of your funds, if the exchange gets hacked. If the exchange closes shop, it will most likely allow you to withdraw your funds. However, it might just as quickly disappear, taking your coins with it. Insecure centralized exchanges are a problem for those who are less willing to trust third parties, which is why they choose to turn to atomic swaps.
What are Atomic Swaps?
An atomic swap is a process of sending cryptocurrencies. Only, the process requires no intermediaries, no exchanges, and no third parties at all. You send your coins to someone else. Atomic swaps are also called peer-to-peer (P2P) swaps, and they are made from one wallet to another, with no exchanges in between.
Atomic swaps are also called trustless swaps because traders do not have to trust one another. They are as secure as crypto trading can get because there are only two options — either the trade transacts in a way that both traders have initially agreed to, or the transaction does not complete at all.
There is no way for one user to trick another during the transaction. Atomic swaps are the best way to swap cryptocurrencies. They are also very cheap, as the only thing you pay is the miners’ transaction fee.
There are no fees that the exchange would keep for itself or withdrawal fees, another proof that you don’t own your funds if you have to pay to get your own money back into your possession.
However, atomic swaps are not as easy and as simple as they sound. Instead, developing ways to conduct them was not. It took almost a decade for developers to figure out how to make atomic swaps of coins that use the same protocol. Initially, the idea was born back in 2012 by a developer known as Sergio Demian Lerner, who created the first draft of trustless exchange protocol.
Almost a year later, another developer known as Tier Nolan came up with the full procedure, which is why this developer is considered the creator of atomic swaps, even though Lerner was the one who originally came up with the idea. Then, a year later, in 2014, the lead developer of Komodo, known as jl777, wrote the code that allowed some of the first atomic swaps. Formerly, the code only worked between Nxt assets, but soon enough, the same developer figured out how to exchange Nxt assets for Bitcoin, and eventually for any coin developed using the Bitcoin protocol.
Leading people to believe that they can go beyond a single blockchain protocol, and start exchanging Bitcoin-based coins for Ethereum-based ones, which we call cross-chain atomic swaps.
Cross-chain atomic swaps was a groundbreaking idea which opened up an entire world of possibilities. To send any coin to anyone without the need to use an exchange is the peak of the crypto dream. Imagine being able to give your USD for someone else’s EUR, across the world, without the need to use the bank. The money would disappear from your hand and appear in the other trader’s hand, and vice versa. Peer to peer (P2P) trading is what cross-chain atomic swaps would allow in regards to cryptocurrencies, which is why blockchain technology is so important.
A New Crypto Concept to decentralized exchange technology
Over the next few years, developers started perfecting the way of sending coins that share the same protocol, such as BTC for LTC, and alike. Then, in February 2018, Komodo managed to bridge the gap and exchange ETH for DOGE. This was the first successful exchange of an ETH-based coin for a BTC-based one, and the cross-chain atomic swaps came out from the realm of possibility and became a reality.
However, as developers are working on perfecting this technology, jl777, the same developer who wrote the code that allowed the first atomic swaps, returned with a new concept, his new idea includes cross-chain atomic swaps that would use private-transaction-only chains, like PIRATE. Currently rumored as ARRRtomic
A bit of history before we explain ARRRtomic concept. Early on, jl777 explains how not even he believed that doing atomic swaps on a blockchain with only private transactions was possible. The use of private transactions is essential, as it makes it more difficult for people to track transactions via blockchain explorers. At first, only the use of privacy-oriented cryptos could resolve the issue, but many started to wonder, and experiment to find more reliable solutions.
jl777 does not claim that he had found the way to do it, but he did get an idea, which he presented on his Medium account. It revolves around the view key that the Zcash developers are developing. The view-key allows anyone who has it to see transaction details. So, what if everyone had it?
According to jl777, this can easily be achieved by putting the view-key into the op-return for the hash-locked z-address transactions. That way, people would be able to prove to the network that the funds were sent to a specified address, which is one part of the atomic swap.
*keep in mind when using a viewing key to prove a transaction to a buyer or seller, be sure to make a separate address for each transaction. If you do all the transaction on the same address, the person with the viewing key can see all your blockchain transactions.
Traditionally, atomic swaps work directly. If traders Jack and Jill wanted to trade, they would both have to deposit their funds to different secure addresses. No one would be able to access these funds, at first. Then, Jack would proceed with sending his coins from the secure address to Jill’s wallet, and Jill would do the same with her coins. If there is something wrong at any point, the trade does not complete, and the funds would return to their rightful owners. The trade would be successful only if every condition is met.
This is why atomic swaps are so secure, and why ARRRtomic cross-chain atomic swaps are such a groundbreaking concept.
As mentioned, putting the view-key in the OP_RETURN script in the blockchain would verify that the network funds are sent to the secure address and proceed from there. That way, transactions would remain private, but still possible, as the details would be available to those who must see them can confirm that the transaction is legitimate.
Millions of tax dollars are currently being spent on blockchain analytics firms so the IRS and other government organizations can collect more taxes from you. Cross-chain atomic swaps will solve this issue because ABSOLUTELY NOBODY CAN TRACE YOUR CRYPTOCURRENCY TRANSACTIONS.
jl777’s concept is a bit more complicated than just that, and he admits that there are still details that need to be worked out. However, the idea itself indicates that it could be possible to do atomic swaps more securely, and as such any centralization killing block-tech like the legendary ARRRtomic is worth exploring further.