The Komodo project launched on Friday the public beta of its latest product, AtomicDEX. The platform seeks to enable trustless atomic swaps between different blockchains, currently connecting Ethereum and its tokens to blockchains like Bitcoin (BTC), Litecoin (LTC) and Dogecoin (DOGE).
Using atomic swaps allows users to trade directly with the native tokens. Someone buying Ether (ETH) with BTC would just exchange ownership of the respective coins on their blockchains, without having to use intermediary tokenized representations.
The integration comes within a dedicated multi-blockchain wallet built by Komodo, which includes the Atomic Swap feature. The beta of the trading system has officially launched on Friday at 6 PM UTC.
Atomic swaps are a type of cross-chain interaction where special cryptographic techniques, usually based on hash-time locked contracts, or HTLCs, ensure that two transfers either occur completely or not at all. This means that two parties in an exchange transaction will swap funds simultaneously, and if either party backs down the transaction is cancelled.
In a conversation with Cointelegraph, Komodo’s pseudonymous chief operating officer known as JC, said that the project aims to connect most blockchain environments, with upcoming integrations including the Cosmos (ATOM) ecosystem and Qtum. In general, the mechanism can support almost any kind of blockchain, though each integration must be added manually. The team is also working on integrating privacy coin Monero (XMR), though with a lower priority.
The exchange uses a more classical model of a decentralized order book supported by torrent-based technologies. This is in contrast to the most popular type of decentralized exchange today, based on automated market makers like Uniswap. The project is also using Band Protocol oracles for setting target prices, though for assets not supported by the oracle network the system relies on CoinGecko. In the future, the team is planning to integrate Chainlink, “as we don’t have to be married into just one oracle solution only,” said JC.
JC reassured that the system does not custody or control funds at any point in the mechanism, noting that “decentralization slows down the [development] process, we can’t just slap bang it all together.” One potential drawback of the mechanism is the requirement of higher security, which requires waiting for blockchains to confirm the trade, JC noted, though this is common to DEXs in general.
Atomic swaps can be a valid alternative to bridging tokens to other blockchains, a process that is usually centralized due to technical limitations. For example, many popular Bitcoin wrappers on Ethereum are facilitated by custodial agents, like BitGo in the case of Wrapped BTC. At the same time, wrapping a token simplifies the process of using it on another blockchain, as once initial liquidity hurdles are overcome, it becomes a relatively seamless process. The DeFi boom has allowed Wrapped BTC to reach wide acceptance, making it easy to swap or use in lending protocols.
There may be liquidity hurdles for atomic swap platforms as well, but the solution could be particularly attractive for purists who do not wish to rely on centralized entities overseeing the token’s issuance.
Ray Schuetz received a Masters Degree in computer science from The University of Texas (Austin). Ray has been working as a full-time blockchain consultant for the past 3 years. In his spare time, Ray enjoys writing for EthereumCryptocurrency.com and other crypto news publications.