Based on nothing but my own experience, I observe that there’s a new generation of traders out there discovering decentralized exchanges — and perhaps cryptocurrency — for the first time.
They wisely waited for both the irrational exuberance and the irrational fear to shake out. When they saw how bitcoin skyrocketed, then plummeted, then failed to go to zero, they figured out that there was some inherent value and maybe it was worth figuring out what that value was. When they saw that, despite the turbulence, BTC turned out to be a good investment for anyone who bought it prior to mid-2017, they realized that they didn’t miss out on much and were smart to let others learn their lessons for them. They saw other cryptocurrencies follow on bitcoin’s success and, rather than crowding out bitcoin, they expanded the market. Just as different sovereign currencies aren’t in direct competition, neither are the different cryptocurrencies which offer differing use cases: liquidity, technological utility, stability, privacy.
So maybe it’s time BQT offered a brief primer on some of the jargon surrounding this corner of the industry. Today we’ll focus on two kinds of swaps you’ll only find on dexes.
Atomic swap
Blockgeeks defines an atomic swap, also known as cross-chain trading, as “a peer-to-peer exchange of cryptocurrencies from one party to another, without going through a third party.”
(It should be briefly noted that “atomic” is intended in the original sense, as in “elemental”. Atomic swaps do not go boom.)
The key element is called a hashed timelock contract, which — without getting technical — is a one-time, temporary payment channel that is exceptionally secure and private — and makes sure that neither party backs out once the agreement is made. HTLCs essentially create an account for a moment in time in which one party creates then deposits digital assets. The initiator sends the counterparty enough cryptographic information to deposit their assets and, once those other assets are deposited, the initiator sends the counterparty the rest of the cryptographic information, which then allows both parties to make their withdrawals.
So with atomic swaps, you can trade cryptocurrencies that are native to different blockchains without going through a centralized exchange, and without taking the intermediary step of trading them for a fiat currency through which you’d have to denominate the trade. Also, because they make trading currency-agnostic, atomic swaps open the door to wider array of digital assets that can be traded.
In other words, it’s the technology that enables such exchanges as BQT.
There’s a lot more to atomic swaps, of course, and I’d refer you to Komodo, the software geniuses who invented them. It’s still fairly new tech — the first atomic swap was in September 2017 — so it’s still maturing. Check back frequently.
Submarine swap
A variation on the atomic swap theme, a submarine swap allows trades not only between different cryptocurrencies, but between different networks.
This is important because of Bitcoin’s well-documented issues with scalability. To overcome this technological barrier, the chain launched the Lightning Network, which is essentially a web of nodes that have the ability to create immediate trades built in.
Problem is, LN isn’t peer-to-peer compatible with bitcoin wallets. But wait, it gets worse: It was designed when alt-coins were still a new thing and it was intended to facilitate BTC-for-fiat trades.
Submarine swaps, then, were invented to allow atomic swaps on LN, thus smoothing out processing for bitcoin while opening up this promising payment layer to additional cryptocurrencies.
If you want to know more, check out this article from Bitcoin Magazine.
The speed of ingenuity
The BQT team may be focused on providing a direct application, but that doesn’t mean we’re uninformed about the technological infrastructure. We have people who could be working for any company in the blockchain space and at any layer of development. We have each chosen to create a platform for sophisticated traders to do business on a peer-to-peer basis, but that doesn’t mean that’s all we understand.
Even if we’re not in the forefront of creating these technological breakthroughs, we keep well-informed and updated about anything that can positively impact our ability to make our product better. We will work with those who are developing atomic swaps, submarine swaps, and any other innovations that 2019 might bring.
We look forward to incorporating them so seamlessly into our user experience that you won’t even know you’re using cutting-edge tech. If you think we’re a stodgy company that is relies entirely on stable, time-tested processes, then I guess we’re doing our job right.
Edward is an Ernst and Young Entrepreneur of the Year Finalist, Blockchain Enthusiast and visionary behind many successful organizations. An avid entrepreneur, Edward has a knack for designing distinctive business models complemented with superior technology to deliver unparalleled service and profitability. Edward also has been advising and consulting for various successful Blockchain technology and ICO projects and recently launched his own BQT.IO P2P exchange helping traders connect with each other to leverage their crypto assets.
BQT.IO has been in development since March 2017 and its ICO launched September 18. The information can be found online at BQT.IO, on Telegram @BQTCommunity and on Twitter as @bqt_ico.