One of the most exciting aspects of the Lightning Network is not just the speed that it will bring. Nor is it the increased scalability and privacy afforded. Arguably just as important is the ability to utilize Atomic Swaps.
What are they?
As previously reported, atomic swaps are a manner in which coins are able to be converted between one another. This is achieved through the use of a type of smart contract known as a hash-time locked contract (HTLC). What this does is enforce pre-set parameters that ensure safe conversion of coins. For a swap to occur, two participants looking to convert their respective coins to those being held by the other, must adhere to the HTLC. Their funds must be sent to the other within a certain time limit, and will only be released to the receiving party once both have sent the appropriate funds.
Why is it important?
This process is important because it negates the need for a centralized exchange in many situations. No longer will a third party need to be trusted to facilitate transactions. In addition, atomic swaps will aid in further decentralization of compatible coins. This occurs simply as a by-product of thousands of people no longer needing to store their coins in communal wallets on exchanges.
It is important to remember that the Lightning Network is not specific to Bitcoin. It is a protocol layer than can be adopted and implemented on various blockchains. There are numerous coins that have stated their intention to implement the game-changing protocol in the coming months. In addition to Bitcoin, Litecoin, Decred (DCR), and even Zcash (ZEC) are all in the midst of implementing the protocol to a degree. Once implemented atomic swaps will be able to take place between any blockchain utilizing the protocol.
How can others help?
Often used as a testing bed for BTC, Litecoin is a lighter, faster alternative to Bitcoin. Creator Charlie Lee was actually the first to achieve the successful completion of an atomic swap in 2017. Lee has recently been in the news again stating how he believes Litecoin can aid in the development and adoption of the Lightning Network on BTC. In the early days of the protocol, users will be able to take advantage of its perks more easily by utilizing a combination of LTC and BTC.
Lee states, “Litecoin will also be the easiest onramp onto the Lightning Network. BTC takes too long and fees to high? No problem. Open an LTC payment channel on chain cheaply and quickly, then atomically swap for BTC if/when you need to. This can be done in one step using submarine swaps! .”
Furthermore, Lee likens the functionality of the Lightning Network to that of a decentralized exchange (DEX). By this, he is referring to the ability to transact between users without the need for a trusted third party to act as an intermediary.
“Lightning Network will be the ultimate decentralized exchange. Users that are running LN on both BTC and LTC can advertise an exchange price and act as a maker earning a spread. Other users can act as a taker and atomically swap LTC/BTC with the maker node via lightning.”
Have we peaked?
Between constant growth and higher levels of understanding the Lightning Network continues to look as though it is an answer to many of the major problems currently plaguing many networks. Through the ingenious use of the different attributes of the protocol, multiple networks and coins can, and should work together to ensure adoption.