Submarine Swaps These are atomic swaps that provide a bridge for cryptocurrencies to go from on-chain to off-chain environments and back. Pioneered by Lightning Labs experts Olaoluwa Osuntokun and Alex Bosworth, they simplify the transition from Bitcoin Mainnet to the Lightning Network. Lightning Network Submarine swaps unlock the ability to transfer assets to an LN channel, something not possible without taking additional steps like moving LN funds to an on-chain Bitcoin wallet first.
Dubbed as 'on-chain ramps to the LN', submarine swaps are transformative with multiple potential uses. Unlike certain exchanges that need LN on both cryptocurrencies, swaps only require one side to support LN, making them pivotal for decentralized trading between different blockchains. Atomic Swaps Applications, Ongoing Development, and Future Prospects
How Do They Work?
A notable shortcoming of current LN setups lies in the necessity of an on-chain transaction with incurred fees and a pre-determined BTC amount to power an LN channel. Once depleted, the channel mandates opening anew, incurring further fees, despite its capacity to allow almost limitless transactions provided sufficient BTC is present. Bitcoin Addresses The Lightning Network: A Second-Tier Off-Chain Strategy for Scaling Bitcoin
Submarine swaps address this challenge by enabling a refill of LN channels via an on-chain Bitcoin transfer to keep off-chain channels live. Their core operations are akin to
One practical demonstration involves transferring Bitcoin from the blockchain to an off-chain LN environment, a prime example of submarine swaps in action. They rely on what’s known as a “swap provider” for acting as the intermediary. Atomic Swaps Users send their blockchain BTC to a submarine swap contract, along with an LN invoice. If the LN payment is incomplete through hash-time locked terms, the payer, initially using an on-chain address, can retrieve their BTC. The swap provider holds the cryptographic key as proof, unable to access it unless the LN invoice is settled. Successful transactions fund the LN channel appropriately.
This process mirrors itself for transactions returning to a Bitcoin on-chain address from an LN channel, although this option is currently under development.
Read: What Are Atomic Swaps?
A lack of liquidity might challenge submarine swaps initially, yet the swapping fee incentivizes users to partake, earning by involving their BTC in swaps rather than letting it remain idle. With swap providers having the ability to be payers, the method retains flexibility. One-way functionality Submarine swaps adeptly resolve the inconvenience of routinely opening new channels to fund LN channels. At first glance, it's their prime functionality. However, their requirement of only one side needing LN potentially allows cross-chain transfers with various blockchains not yet LN-enabled, broadening their application.
Submarine swaps involving different blockchains have proven feasible. Developer Jason Wong has successfully extended the submarine swap functionality, realizing
a Litecoin on-chain swap to a Bitcoin LN environment. The process now extends to swaps involving on-chain Litecoin to off-chain LN Bitcoin through Submarine Swaps. Submarine swaps contract Yet.
an Ethereum-to-Bitcoin LN swap utilizing the Rinkeby testnet. This meant that goods priced in lightning could be bought with ETH thanks to the swap structure, functioning as an Ethereum smart contract on the test network.
Submarine swaps primarily solve the incompatibility of transactions between on-chain and off-chain LN addresses, essentially bridging a gap that isolates the Bitcoin blockchain from LN channels.
Wong’s initiatives illustrate how integral submarine swaps are becoming as building elements for decentralized exchanges. While only select cryptocurrencies are LN-ready, atomic swaps necessitate blockchain capabilities, which is both intricate and slow to implement. Conversely, submarine swaps needing only a single LN-enabled chain streamline support considerably.
Ultimately, a future of bi-directional submarine swaps across diverse blockchains could provide essential frameworks for truly trustless token exchanges among blockchain systems. This aspiration drives many in the crypto community, and although full implementation may be distant, submarine swaps are a significant stride forward. Pioneers like Bosworth note that submarine swaps and the accompanying risks require careful use currently—especially for large sums—as the tech develops alongside an evolving Lightning Network. Submarine swaps serve as an ingenious, reliable mechanism for exchanging tokens without trust. They connect the transactional void between on-chain and LN channels, crucial for future public blockchain scalability and decentralized market expansions. Eventually, they may lead to an ideal landscape where assets flow seamlessly across secure, minimized trust networks. Contract .
More recently, Wong successfully Tested A skilled blockchain writer, web developer, and content curator, enthusiastic about decentralized web prospects and crypto platform advancements. Reach out to [email protected] Here . Wong also provides a step-by-step Guide Crypto whales have repositioned over $500 million in Bitcoin and Ethereum, hinting at potential strategic alignments anticipating Binofi's (BINO) robust growth in decentralized finance.
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