Lightning Labs Tests Its First Cross-Chain Atomic Swap Between Bitcoin and Litecoin
In the past few years, the cryptocurrency market has evolved with a large number of virtual digital currencies participating and contributing to the market. With investors being invested in different kinds of cryptocurrencies, there has been an increasing interest among users and enthusiasts about the concept of exchanging currency in a decentralized manner across blockchain through atomic swaps.
The development team at Lightning Labs has arrived with an interesting solution and is said to have successfully tested swapping of currency between the Bitcoin and the Litecoin testnet through the lightning network. This was a good idea to first check it on testnets rather than directly trying it out on the actual blockchains. The outcome was that both these coins successfully changed hands, but no transaction was registered as it was being done on testnet. Moreover, just because both - Bitcoin and Litecoin have implemented SegWit, it was possible to test this Lightning cross-chain atomic swap.
Charlie Lee, creator of Litecoin told Bitcoin Magazine "Previous atomic swaps that I have done were on-chain, and had the on-chain limitations of slow [transactions] and high transaction fees. Off-chain atomic swaps are significantly better. They are instant, [have] low fees, and better protect one's privacy.”
Also, one of the major problems with on-chain atomic swaps is that they are not able to make instant payments and the delays, in this case, could be as long as an hour. This was the first such successful attempt made by using Lightning technology. The Lightning network is basically a second-layer solution that is built on the top of the Bitcoin network. It is an open protocol and operates off-chain.
Such Lightning networks running on different blockchains can also be used to effectively link the two network together. It will also allow peers to exchange coins easily and at an instant from one channel to the other.
Conner Fromknecht, a developer at Lightning Labs said "The primary advantages over previous solutions are speed, cost and privacy. Transfers are more or less instant, and don't require the cost of an on-chain transaction. Additionally, in the cooperative case, the transactions are never broadcast, and leave no trace on the blockchain, offering privacy benefits. And with any luck, these privacy benefits will only continue to improve.”
He further added "Arguably the most important benefit of Lightning swaps is the ability to efficiently exchange different currencies without a custodian. Our ecosystem heavily depends on exchanges to fulfill this role today, but Lightning swaps offer users a choice to get the best of both worlds - instant exchanges without relinquishing control of your money.”
Another very important feature of the Lightning network is a special payment type known as Hashed Timelocked Contracts. Here, the atomic swaps and Lightning payments are done in quite a different manner as compared to the on-chain swaps. The Hashed Timelocked Contracts facilitates any party to cash out at any time until they broadcast their swap commitment transactions to the blockchain network. However, note that for users to use the Lightning network, the must have an active payment channel on each chain involved in the swaps. Atomic swaps first became possible in Viacoin which was the first coin to implement Peter Todd's CHECKLOCKTIMEVERIFY, enabling Hashed Timelocked Contracts.
In order to know more in detail about the Lightning Swap, check out their official blog post which also has a video demonstrating how the swap takes place between the testnets.