A Call For Atomic Swap Industry Standards in Blockchain
The views expressed in the community content section and other contributions on Komodo’s Medium are those of the authors and do not…
This post originally appeared on the Komodo Medium page in 2018. Today, it should apply to all p2p markets. It is a call to unite their liquidity, or perish.
Atomic swaps are one of the holy grails of cryptographic finance. Distributed peer to peer order books and trades designed without the need for a custodial third party, allowing interoperability between blockchain networks.
Significant talk and effort have been put into this area since the early days of Bitcoin but where are atomic swaps at today?
Before we dive in allow me to lay it out in simple terms and include the various kinds of exchanges currently available in the crypto finance space.
Atomic Swap exchanges — cross blockchain trustless p2p trades. On chain transactions
Semi Decentralized — third-party short term custodianship, such as Shapeshift and Changely.
Fully centralized crypto banks like — Binance, Kraken, Coinbase, Bittrex, Poloniex, etc.
Peer to Peer, escrowed, semi decentralized exchanges. These are often crypto to fiat and crypto to crypto, they often use multisignature arrangements to protect against one party running away with the other’s money — LocalBitcoins, Bisq.
Silo DEXes. These are on-chain, token to token to base utility token— exchanges like EtherDelta, Bitcoin’s DEX built by Counterparty, among others. Silo DEXes live inside blockchains and so benefit from there distributed networks and network effects. However, they are currently mostly isolated from other networks and unable to talk to other Silo DEXes or Atomic Swap networks, hence why they are Silos.
The mecca would be interoperability among many of this. In particular the Silo DEXes and the Atomic swap Dexes. This is particularly true in a fiat-less world, which we are a long way from in my opinion. So the intermediary path would also include integration with fiat to crypto exchanges and crypto banks.
As the 2018 bear market hits some of its lowest lows, I did a light tour of a few of the leading atomic swap efforts in the space, specifically Komodo and Atomicwallet.io.
Atomic Wallet
Let’s start with Atomicwallet.io which is without a doubt the leading project in terms of user interface.
AtomicWallet is a straightforward download and a one click install. It works directly on windows among other platforms although currently only on desktops. Still that’s remarkable given my non exhaustive research into this emerging industry.
Currently, it seems to only support three coins through pure P2P atomic swaps, BTC, LTC, and Qtum. Which is a small sample, however, the interface is fairly straightforward, borrowing the feel of the Exodus wallet (and based on the features, some of its code as well).
Nevertheless, it supports a much wider variety of coins and tokens through a very impressive strategic partnership with Shapeshift and Changely, two semi-decentralized exchange giants.
This is one of the most impressive and optimistic things about Atomic Wallet and draws the writing on the wall. It says loudly and clearly that these giants are putting serious attention and resources, development, and likely otherwise into decentralizing the trading space.
Thanks to all of this, the future of exchanges are now more likely than ever to be decentralized across blockchain networks.
I don’t have clear stats on how much volume moves through Atomic Wallets However, I have seen the consistent growth of this branch of the industry. Volume starts low however and it may be a while before user interfaces are easy enough for noobs to actually enter. For volume to support whales and traders and for such efforts to be profitable enough compared to centralized exchanges.
The no questions asked and trustless nature of atomic swaps solves risks of centralized exchanges from both a legal perspective as well as the potential for custodial exchange failure at the cost of trading speed.
Komodo
Komodo is without a doubt one of the largest Atomic Swap players in the space. Having been working on this problem for over five years, their experience in this industry is extensive and their expertise deep. There are however a variety of dragons to slay — so to speak — before Komodo can really be adopted by the public. Let’s have a look at where they are at.
Komodo is an open-source, atomic swap-centric, tiered node network, token platform. As of lately, it is moving in on the ‘smart’ contract ecosystem ( I put smart contract in quotes, because as far as I’ve seen no “smart contract” is actually, particularly smart)
One of it’s recent calls to fame was the stress test of its atomic swap wallet and engine, BarterDEX, which reached into the hundreds of thousands over a couple of days, looking for the limits of its capacity to scale.
That is a serious showcase of its technology and back-end.
That’s without using Lightning Network (LN) like technology. Payment channels such as LN and Ethereum’s related, ‘Plasma’ which share various degrees of similarity with the core features used in atomic swaps.
Unlike AtomicWallet, BarterDex supports a much wider range of tokens. Purely through an atomic swap model.
With a market capitalization of 143 Million USD and ranked at 57 at the time of writing. Komodo has a fairly active community, including various small teams funded by its blockchain through a built in funding model.
However, it has recently been taking some serious pounding during this 2018 bear market and I have some thoughts as to why that might be.
Unlike Atomic Wallet, which has blown past other user interfaces I’ve seen in recent months, Komodo has been focusing on token integration and its version of ICOs.
While AtomicWallet moved at light speed towards ease of installation and ease of use at the cost of new tokens. This is visible in the very few coins supported.
Komodo even claims to support ethereum tokens. While the Atomic Wallet is currently ‘working on it’.
However, Komodo’s BarterDex interface, as good an attempt as it was, leaves much to be desired. I tried hard to execute a trade a few months ago and gave up. And I’ve been in this space for quite a while. It’s design is nice, and login in is, clean however the download and trade execution was way too complicated.
I fear that Komodo has spent too much energy trying to get new tokens integrated, and nowhere near what is needed to make trade among the highest volume, most popular crypto tokens, easy for tech noobies. Of course, BarterDEX never claimed to be a noob-friendly wallet. It was a beta, and the first generation of likely many more to come.
A few months ago, Grewal Satinder the lead developer of BarterDEX took a step back from UX development and told me recently he is now focusing on Komodo core development, building his skills up to work on it’s emerging smart contract layer.
To fill the gap, a new development team rose to prominence withing Komodo, funded partially or perhaps fully through Komodo’s blockchain funding mechanism. The new wallet is called HyperDex.
Lead by a talented young developer LukeChilds and Pondsea a Komodo veteran, HyperDex’s interface is looking very good.
Have a look at a recent Demo of the interfaced published in May. LTC vs Dogecoin.
I spoke to LukeChilds briefly about his work on the new wallet, and asked him what he thought was needed to take Komodo’s Atomic swap ecosystem to the next level. He said:
“I think the marketmaker daemon should be the number one priority that’s the main thing that’s severely limiting us at the moment with HyperDEX and what we can do with it”
The market maker deamon is a piece of a greater puzzle, the order book matching and match making robot behind the BarterDex Komodo engine.
In other words. The cutting edge of atomic swaps, seems to be at the distributed orderbook layer.
This takes me to the final point and full circle back to the holy grail of crypto.
A call for atomic swap and distributed order book, industry standards.
Komodo and Atomic Wallet are far from the only projects working on atomic swap trade interfaces. Here’s a list of a few hundred different announced decentralized exchange projects.
Any of those that intend to use atomic swaps will likely run into the same problems. Limiting their volume, liquidity and fundamentally failing to solve the problem.
Why? Because their specific implementations of the orderbooks and atomic swap protocols are isolated and not standardized.
In other words. The DEX industry may need to come together and develop a common language, with which to trade, before any of these projects can really reach the scale they wish for.
As well as a communication or networking protocol for these.
In the meanwhile, LukeChilds agrees that without consensus around such an atomic swap standard, the game remains a -winner take all- with one implementation breaking through as a the market dominant.
Or establishing ‘Bridge nodes’ which integrate various independent atomic swap implementations.
This he points out just takes us back to highly trusted third parties.
Final thoughts on Scalability and the edge of the edge.
Lightning networks are very compatible with atomic swaps, leading to some serious talk among thought leaders of Bitcoin’s Blockstream, Litecoin’s Charlee Lee, and Monero’s Fluffy Pony, in regards to the potential of bridging the three networks together through Lightning Atomic Swaps.
Ethereum is certainly compatible, given its wide programmability, however I am less familiar with where Plasma is at or what it would be required to plug it in.
A consumer grade cross chain Lightning atomic swap interface for top coins like Bitcoin, Monero and Litecoin remains mostly theoretical yet not too distant a possibility.
Disclaimer: I am paid by the Komodo blockchain to maintain a portion of its tiered infrastructure.