Decred
$134.38 2.40%
DCR · 194w

On-Chain Atomic Swaps

As many of you know, yesterday marked the first cross-chain atomic swap between Decred and Litecoin. This is an important step in a direction that allows users to conduct trustless, cross-chain, over-the-counter (“OTC”) trades without a third party. This disintermediates the exchange process between cryptocurrencies that support these swap transactions. We have created some simple prototype tools under the atomicswap repository, dcratomicswap, btcatomicswap and ltcatomicswap, to allow Decred, Bitcoin and Litecoin users to swap between DCR, BTC and LTC using on-chain atomic swaps. These tools were built for those who we have the means at hand to disintermediate the exchange process: transaction script and OP_CLTV support. It is worth noting that these tools do not address the issue of order book management that is typically performed with full-featured exchanges. There are some privacy and transparency consequences related to on-chain atomic swaps that are not present with centralized exchanges. As of this announcement, the tools are text-based, but we will be integrating this into the Decrediton GUI wallet in a future release. The process for on-chain atomic swaps is described in more detail below.

Prerequisites

In order to perform an on-chain atomic swap between 2 cryptocurrencies, there are several prerequisites. Both chains must support:

branched transaction scripts the same hash algorithm in both chains’ transaction scripts signature checks in transaction scripts CheckLockTimeVerify or CheckSequenceVerify (“CLTV” and “CSV” for short) in transaction scripts

Since Decred and Litecoin are forks of Bitcoin, the first 3 conditions are trivially satisfied. Further, both Decred and Litecoin have been tracking updates from Bitcoin, so they both support CLTV. The CLTV/CSV support is used to effect a refund, in the cases where either party does not complete part of the process. With some further work on par...

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