Friday, November 17, 2017

Atimic swaps across blockchains

You might think using an atomic swap requires a certain degree of trust, but that is not really so. Atomic swap is using a hashed time-locked contract, which is a part of the scripting language used for most major cryptocurrencies in existence right now. It has been added to Bitcoin Core on proposal of Peter Todd, a well known bitcoin developer.
Normally an exchange between two parties runs the risk that one runs off without paying for the goodie.  If each party obeys an honest protocol, there is no problem. Who enforces the honest protocol? There is code in crypto coins specifying unique handling requirements.  One of these scripting codes includes, "wait for a while before releasing the coins".  Great, atomic swaps, but in fact there is a third party, the miners interpreting the script, basically enforcing the fair trade. It is not a cash atomic swap.

Here is how an atomic swap works today. I give you a cheap phone with $5 in its digital wallet, and I give you the pass code.  You can spend my five dollars.  That is atomic, no network needed. This is atomic because the keys to the ledger are inside the phone, and that is generally protected by the pass code.  In order for me to cheat, go out and re-create the phone and ledger keys, I need a lot of work.  That is expensive counterfeiting.

These low end phones today are easily cheap enough for dedicated smart cash cards, and almost the right size. Ditch the large screen, make it thin and protected.

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