Cross-chain bridges and atomic swaps are useful tools in the crypto space, but what exactly are they?
Are cross-chain bridges and atomic swaps the same thing?
If not, what’s the difference between the two?
What Is an Atomic Swap?
This may sound similar to smart contracts, which execute contracts if a set of pre-defined conditions is met.
That’s because atomic swaps use smart contracts to function without intermediaries.
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The purpose of atomic swaps is to remove the need for fiat currencies in cryptocurrency exchange.
Atomic swaps use Hashed Timelock Contracts (HTLCs) to facilitate trades.
If any conditions in the contract are not met, the transaction will not go through.
The trade is either fully executed using HTLCs, or not executed at all.
On top of this, you don’t need a centralized platform to carry out an atomic swap.
Information and power are distributed across multiple connection points or nodes on decentralized platforms.
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This is why atomic swaps are a key service used in the DeFi industry.
If there’s anything crypto traders love, it’s low transaction times and fees.
But atomic swaps are not a perfect technology.
Like many crypto tools, they have numerous drawbacks.
Firstly, you could only swap cryptocurrencies with the same hashing algorithms, which can be pretty limiting.
On top of this, atomic swaps aren’t always fast.
What Are Cross-Chain Bridges?
Cross-chain bridges are applications that facilitate transactions between independent blockchains.
One of the biggest problems faced by blockchains is that they’re isolated.
This means that they can’t communicate with each other without the help of additional tools.
This is where cross-chain bridges come in.
Cross-chain bridges provide blockchains with interoperability, allowing cryptocurrencies to be transferred from one chain to another.
Let’s go through how these work.
When this is done, the wrapped version of these tokens is then minted on another blockchain.
Lastly, a lock and unlock cross-chain bridge involves tokens being locked on the original chain.
At the same time, the same amount is made accessible within a liquidity pool on the destination chain.
This technology can also make usingDApps (decentralized apps)on various blockchains easier.
However, there are a few issues surrounding cross-chain bridges, namely their security vulnerabilities.
Cybercriminals tend to target cross-chain bridges because they can have security vulnerabilities to take advantage of.
Binance Bridge, which we briefly discussed previously, is an example of a centralized cross-chain bridge.
