Distributed Atomic Swap on Cryptocurrencies

Abstract

Anyone who wants to trade something in his possession with something else desires three things: To trade at the most appropriate rate, to trade at the least cost, not to be exposed to theft and fraud during the clearing. The cryptocurrency swap is also no different from swapping of any two entities. Crypto-currencies are getting more and more attractive day by day because their stock exchanges are open 24/7. Although all crypto-money markets in the world have similar expectations, existing market models have difficulties and risks while operating on them. The problem of this research is centralized exchange markets and risks while operating on them. The study aims to develop a distributed exchange model on blockchain using smart contracts for atomic swap method, and payment channels technology for liquidity. With this model, users will pay less without taking risks of centralized exchange markets, like hacking, theft and fraud.  In central exchanges, users first send their cryptocurrencies to the stock exchange's account to trade. This results in collection of all cryptocurrencies of users in a single pool. With this model, users will be allowed to wait in their wallets until the cryptocurrency is exchanged, and the risk of central hacking will be eliminated. Original contribution of this study to the literature is to combine Atomic Swap and Payment Channels technologies to create a liquid decentralized stock market model as much as central exchanges.

Keywords: Atomic Swap Between Cryptocurrencies, Block-Chain; Cryptocurrency; Distributed Cryptocurrency Market; Cryptocurrency Payment Gateway

DOI: 10.7176/CEIS/11-4-05

Publication date:August 31st 2020