Atomic Swap

An Atomic Swap is a trading technique that allows two different parties the ability to swap, or exchange, one cryptocurrency for a completely different cryptocurrency, all without involving a 3rd party like a centralized cryptocurrency exchange (CEX), such as Coinbase.

The transaction happens with the use of a smart contract, allowing the transaction to happen even if the two parties don’t know each other.

This is accomplished through a series of smart contract rules and conditions that must be fulfilled within a specific amount of time before the trade actually happens.

The smart contract generates cryptographic proofs, confirming the funds that each party wants to exchange.

Atomic swaps are beneficial in that they’re fast.

They also don’t depend on intermediaries that could introduce security concerns simply because you use them.

They offer the parties involved more control since everything happens from a personal wallet and not a wallet with another intermediary.

Atomic Swaps can be more affordable than trading on traditional centralized exchanges.

Related Terms

Wallet

Made up of a unique public address called your public key (similar to your bank account number) that you can share with the world, your friends, family, and other businesses and companies that you trust, to send and receive digital assets. A wallet also stores a private key (much like the PIN that you use to access your bank account at the ATM), which, when combined with the public key, confirms ownership of the wallet, and allows you as the wallet owner to view the digital record of your wallet transactions, and allows you to perform actions such as buying, selling, withdrawing, and swapping funds.

Desktop Wallet

A common type of crypto wallet used to securely store and manage your private keys on a computer hard drive. They’re considered more secure than web-based wallets, since you can only access them from wherever your computer is located, and again, you control your private keys.

Peer-to-Peer (P2P)

Describes the sharing of data or assets between 2 or more parties without any central authority making the transaction happen. P2P exchanges tend to offer transactions that are censorship resistant, cheap, private, and secure.

Software Wallet

A form of cryptocurrency wallet that’s based on software, so installed as a mobile app or accessed via a website, or installed as software on a desktop or laptop computer. The software itself stores your private keys that are used to access your cryptocurrency funds.

Non-Custodial Wallet

Also referred to as a self-custodial wallet, puts the responsibility of storing your wallet keys in your hands. Non-custodial wallets come in different variations, including web-based, software installed on a smartphone or computer, a hardware device like a USB thumb drive, or even paper.