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Decentralized exchanges have become a reliable way to exchange cryptocurrencies where people don’t have to utilize any exchange-based wallet. Instead, exchanging crypto is possible through a noncustodial wallet that only holds a private key. Decentralized exchanges (DEXs) use several trading mechanisms, such as order books and automated market makers (AMMs), to make transactions smooth and secure.
However, DEXs have gotten a boost in user adoption from developments such as atomic swaps, a peer-to-peer exchange method in which two or more parties can directly exchange cryptos through their personal wallets. One of the largest privacy-focused cryptocurrencies, Monero (XMR), has experienced a 20% price surge after implementing the atomic swap in its system. According to Monero project contributor ErCiccione, this brand-new concept allows investors to exchange BTC and XMR without involving any third-party exchanges.
Implementing atomic swap represents a big leap for the cryptocurrency industry as traders and investors now have more liquidity in the market. In the following sections, we’ll look at what are atomic swaps, provide easy examples and elaborate on the transaction process.
Atomic swaps are a technique of quickly exchanging cryptocurrencies on different blockchain systems. This method is often known as atomic cross-chain trading, where the exchange happens through a smart contract between two personal crypto wallets. It is a peer-to-peer (P2P) transaction system using different blockchains.