All posts in "Fundamentals"

Why Atomic Swaps Are Important

By Bronson Tang / January 4, 2018

Over the past year or so Atomic Swaps has emerged as the trending topic of choice for crypto enthusiasts. Atomic Swaps will be an potential game changer in 2018 and the years to come.

In this brief analysis of Atomic Swaps, we will discuss the following:

  • What are Atomic Swaps?
  • Why do they matter?
  • Advantages
  • Challenges 

What are Atomic Swaps?

An Atomic Swap allows you to exchange one crypto/altcoin for another from your wallet without a third-party intermediary (like an exchange). In other words, instant settlement trading from one blockchain to another blockchain.

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An atomic swap is a direct trade between two different coins running on two separate blockchains; there are no centralized-exchange websites or other third-parties required for this trade. The technology enables common users to bypass the labyrinth of website-exchanges currently necessary to purchase cryptocurrencies. Once implemented, the atomic swap will allow common users to trade and purchase any desired coin directly within their own wallets.
Komodo Platform

]

It’s worth noting that this feature of instant settlement, is made available from the folks at Lightning Labs creators of the Lightning Network protocol.

According to Elizabeth Stark, co-founder of Lightning Labs, the Lightning Protocol functions as a “checking” account with instant settlements, while cryptocurrency/bitcoin on the blockchain would act as a “savings” account. The two will be connected via the Lightning Protocol. Crypto on the blockchain could be transferred to lightning for day-to-day trading/expenses, where transactions and settlements will be seamless and automatic.

The Lightning Network protocol scales Bitcoin and other blockchains such as Litecoin, Decred, VertCoin, MonaCoin, Syscoin, Digibyte, Groestlcoin, and Viacoin.

In order to perform an atomic swap between 2 cryptocurrencies, there are several prerequisites. Both chains must support:

  • Branched transaction scripts
  • Identical hash algorithm in both chains’ transaction script
  • Signature checks in transaction scripts
  • CheckLockTimeVerify or CheckSequenceVerify (“CLTV” and “CSV” for short) in transaction scripts

Why Do Atomic Swaps Matter?

Prior to Atomic Swaps, you were required to use a third -party middlemen to conduct trades.

Fast forward to today, and with the advent of atomic swaps conducted between Bitcoin and LiteCoin, Litecoin & Decred, and Litecoin & Vertcoin, you can now implement a trustless exchange between two parties without a third party such as an exchange.

According to Andreas Antonopoulos, author and speaker on Bitcoin and cryptocurrencies, the main benefit of Atomic Swaps is the ability to couple two inherently separate blockchains together and creating an exchange of value whereby both parties are ensured and protected from fraud and or malicious intent to cheat.

In other words, a transaction utilizing Atomic Swaps will either take place successfully where both parties are satisfied, or not at all. The benefit of Atomic Swaps is that transactions become completely and fully automated as the currency morphs itself into another currency instantly, fluidly and liquidly.

Atomic Swaps - Advantages

We covered some of the advantages above but let’s quickly recap:

  • ​Instant transactions - Wait time for confirmation and transactions to clear have been reduced
  • Lower Costs - switching costs are near zero
  • Security - Ability to retain your private key as opposed to keeping your private key on an exchange
  • True P2P - Atomic swaps are true peer to peer exchange of value
  • Transparency - A sort of “open” network - Trades are conducted in a manner the prevents one person with large amounts of market share from creating fake volumes.

Atomic Swaps - Transaction Fees & Privacy

Atomic swaps were created for large trade volumes that require low latency and high frequency. And as transactions depend on the blockchain, (for example an atomic swap between BTC and LTC) one might have to wait for the confirmations to be cleared one one side.  Thus, contributing to somewhat of a low latency response. Moreover, with the BTC to LTC atomic swap example, transaction fees could be inflated as well, as BTC tends to have higher transaction fees.

Another potential disadvantage to atomic swaps is in the area of privacy. As the hash value is shared during the atomic swap transaction(s), the transaction(s) can be easily traced.

Atomic Swaps that are conducted on-chain can have privacy issues that users need to be aware of. As each transaction is “swapped” a hash value is created, unfortunately that same hash value is used throughout the transaction lifecycle. Thus making it easy for someone from the outside to monitor the two blockchains as the coins get swapped from one to the other. Following the coins from one chain to the other can pose potential issues, however there is no specific identifying data on either side of the swap that can link the transaction to the actual user’s true identity.

Conclusion

Atomic swaps certainly will be a game changer in the crypto space.  The ability to easily and effortlessly exchange value between one altcoin to another and thereby effectively bypassing the third-party exchanges and intermediaries allows users the freedom, comfort and security and therefore restoring the power back into their own hands.

We at Mango Research, foresee extra-ordinary new developments in and around the area of atomic swaps and we are extremely excited for its mass user adoption into the crypto-sphere.

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Waves Blockchain: Ahead of the Competition

By Shawn Dexter / December 29, 2017

The Waves Platform has been a silent giant for a while now. But in the past few months, this giant’s rumbles have been getting louder – too loud to ignore anymore. While 2017 has drawn a lot of attention to the massive adoption of Ethereum & Bitcoin, it has also begged the question of blockchain scalability. As 2017 draws to a close, neither (Ethereum and Bitcoin) have shown a satisfactory solution to the scalability problem. Yes, Ethereum has promising plans in place – but we are far off from seeing those plans realized. The Waves Platform, however, have silently developed and deployed a solution that makes them the fastest blockchain in the world.

Putting Matters In Context

  • Visa averages 2000 transactions/per second   (peaking at 50k per second)
  • Bitcoin averages at 3 transactions/per second  (peaking at 5 per second)
  • Ethereum averages at 5 transactions/per second (peaking at 7 per second)

It’s evident – in order to compete and support continued growth, scalability needs to be addressed as soon as possible. Failing this, confidence in blockchain technology will wane until the tech catches up to the demand and expectations.

Enter: Waves-NG

A week ago Waves-NG went live on the Waves Platform mainnet – allowing them to process  upto 1000 transactions per second!  This effectively makes them the fastest decentralized blockchain operating in the world.

Waves Blockchain:  1000 transactions per second - (currently capped at 100 tx/s)

Let’s be clear – this is NOT a theory/whitepaper. This is a working solution that is live for everyone to use. This allows the Waves platform to go mainstream while other platforms stagger to overhaul their architecture to improve their scalability (while possibly risking security – a major feature of blockchain tech)

The Waves-team have demonstrated inspiring and commendable “forward-thinking”. They focussed on laying the foundation to allow for maximum throughput on their blockchain technology before the bells & whistles (unlike many other teams).

What & How : Waves-NG 

TLDR

Waves-NG is an implementation of “Bitcoin-NG” – originally proposed by Emin G. Sirer & Ittay Eyal.
(I’m going to try to not get too technical here… but bear with me)

What it’s NOT:

While the Bitcoin community is a never-ending debate on whether “blocksize” needs to increase or not, NG does not concern itself with that argument. NG does not increase the size of blocks. NG does not reduce block interval time.

NG discards the block-size and block-interval solutions. Due to the nature of the distribution algorithm,  increasing block-size or decreasing block interval lead to security risk and unfairness (because of increased forks, prunes etc).

What It Is:

Waves-NG approaches the problem by inverting the behaviour of the blockchain.  The current bottleneck for the throughput of the bitcoin system is its block-propagation.  NG breaks open this bottleneck by reversing how the blocks are propagated.

In the original Bitcoin system, the system has to wait idle while miners work to “discover” the next block. Hence, throughput is limited by blocksize and block interval. NG, on the other hand, uses a leader-election method (via keyblocks & microblocks) to allow blocks to be mined in a continuous approach – without being limited by block size and block interval.

NG essentially allows for the system to achieve the highest throughput allowed by the network. This allows the Waves Blockchain to handle hundreds of transactions per second without sacrificing the ideology of decentralization.

In a nutshell: Waves-NG  increases the number of transactions significantly and allowing for optimal use of the network (without being limited to number of nodes, block size etc) while still keeping intact the essence of decentralization.

Moving Forward

It has to be noted that even with Waves-NG, the scaling problem is far from “solved”. The crucial problem of every node processing every transaction still serves as bottleneck.

But this is a great start – and puts the Waves blockchain miles ahead of its competition. With Waves-NG in place, every scaling effort will achieve a multiplicative result.  Vitalik Buterin, founder of Ethereum, said just as much in regard to technology improvements and the NG protocol:

The increased scalability offered by NG should be multiplicative with increases from added tech (ie. if tech gets 4x better and NG gets added that's a 40x improvement)
Vitalik Buterin

It’s Only Getting Better:  Smart Contracts, Multisig, Atomic Swaps

The Waves team have been inspirational in their forward-thinking and discipline. With NG and a fresh new user interface in place, the team are now tackling feature developments that can take advantage of the scalability foundation and usability that the Waves blockchain already offers.

2018 will usher in smart contracts, multisignature, unique atomic swaps and even anonymity.  This giant’s rumbles are definitely getting louder

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