Neukind atomic swaps

Lai explains about Atomic Swaps.
A technology that allows you to exchange cryptocurrencies peer-to-peer without a third party

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Atomic Swaps
A technology that allows you to exchange
cryptocurrencies peer-to-peer without a third party

2019.07.26 Last Updated:

2. Neukind, Inc. | All Rights Reserved
Technology Behind Atomic Swaps？
STATE
CHANNEL
PAYMENT
CHANNEL
HASHED TIME
LOCK CONTRACT
(HTLC)
Hashed Time Lock Contract (HTLC)
An off-chain escrow that allows users to perform
transactions without the trust of both parties

“Hashed”
A hash is the lock to the contract. Hash protects
the funds from being assessed until both users
have submitted the correct secret phrase

“Time Lock”
Time lock allows sender to claim a refund if the
escrow expires

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Why Do Atomic Swaps Matter?
Problems faced by centralized exchange
-Vulnerability
-Funds mismanagement and human error
-High operating/ trading costs
-Volume demands
-Government regulation

Advantages of Atomic Swaps
-Altcoins can be exchanged directly without using /BTC or /ETH pair
-Low exchange fees
-Do not have to trust a third party

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How It Works? - Step 1
0x8753337926e5...
Hashed Time Lock
Contracts (HTLC)


Step 1 - Alice generates a HTLC and send BTC to the address
- She also generates a KEY and a LOCK (the hash of the KEY)
BobAlice

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BobAlice
Step 2 - Alice sends a copy of the LOCK to Bob
- Bob generates another HTLC address using Alice’s LOCK and sends ETH to it
0x8753337926e5...
Hashed Time Lock
Contracts (HTLC)

0x8753337926e5...
Hashed Time Lock
Contracts (HTLC)


How It Works? - Step 2

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0x8753337926e5...
Hashed Time Lock
Contracts (HTLC)

0x8753337926e5...
Hashed Time Lock
Contracts (HTLC)


Step 3 - Alice uses the KEY to access Bob’s ETH
- Bob knows Alice’s KEY in this process
How It Works? - Step 3
BobAlice

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0x8753337926e5...
Hashed Time Lock
Contracts (HTLC)

0x8753337926e5...
Hashed Time Lock
Contracts (HTLC)


Step 4 - Bob uses the KEY to access Alice’s BTC
- The swap is completed
How It Works? - Step 4
BobAlice

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Limitation
-Same hashing algorithm (e.g., Bitcoin : SHA-256)
-Support HTLC and other programmable functionalities

Concern
-Users privacy
* One of the solutions is to use privacy-focused cryptocurrencies
Limitation & Concern

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