Atomic Swap Protocol

The technique allows direct peer-to-peer exchanges between users across different chains

Atomic swaps allow two parties to exchange assets across different blockchains without trusting a third party, and transactions are either completed in their entirety or not at all.. This can be achieved using hashed time-locked contracts (HTLCs).

How It Works:

1. Initiate Swap:

   • User A on Chain A wants to swap Token 1 for Token 2 with User B on Chain B.

   • User A locks Token 1 in an HTLC on Chain A.

   • User B locks Token 2 in an HTLC on Chain B.

2. Hash Preimage:

   • Both HTLCs are created with the same hash lock and time lock.

   • User A generates a secret (preimage) and hashes it. The hash is shared with User B.

3. Redeem Tokens:

   • User B can unlock Token 1 on Chain A using the preimage.

   • Once User B reveals the preimage, User A can use it to unlock Token 2 on Chain B.

4. Fallback Mechanism:

   • If the swap is not completed within a specified time, both HTLCs expire, and the tokens are returned to their original owners.

This mechanism ensures that tokens are directly swapped atomically between private pools without needing shared pools.