With the launch of the first atomic swap between Litecoin and Bitcoin this month, it’s only a matter of time before this cryptocurrency could start seeing an extreme level of mainstream adoption. With the current transaction costs of Bitcoin getting more and more expensive, this way of transacting between the two currencies is a revolutionary way of getting the best of both worlds between the two coins.
Litecoin is a coin that is able to be sent and received extremely fast. At the “speed of light”. Litecoin runs on the Lightning Network. Lightning Network technology creates a few new opportunities when it comes to cross-chain atomic swaps. For one, the Lightning Network boasts a special payment type referred to as Hashed Timelocked Contracts. They allow Lightning payments and even atomic swaps to be performed in a very different manner from regular on-chain swaps. These contracts allow any party to cash out at any time as long as they broadcast their swap commitment transactions to the blockchain.
When comparing it to Bitcoin’s current speed and transaction fees, it’s like comparing a cash transaction taking place in person (Litecoin) to a wire transfer payment to someone in a foreign country (Bitcoin). Bitcoin is not wire transfer slow, but it is snail mail in comparison to Litecoin. Currently, the Bitcoin blockchain is very expensive to transact using Bitcoin. For example, the mining fee to send 500$ worth of Bitcoin is currently around 16$. Whereas to send that same 500$ worth of Litecoin, the mining fee is less than 50 cents. It is easy to see the clear advantage of a person wanting to send Litecoin instead of their Bitcoin in order to make a purchase, or perhaps even to exchange to a different form of cryptocurrency.
What the atomic swap technology has provided is a way that each of these cryptocurrencies can be exchanged between one another instantly with no middleman to take place in the exchange. Currently for someone to convert their Bitcoin to Litecoin and vice-versa, they must put those coins onto an exchange where they then have a trusted 3rd party to facilitate the exchange between coins at the current spot price of each coin. The transaction then has a record on the blockchain ledger, where it is on display for anyone to see. The atomic swaps are a game-changer. Through these atomic swaps, the transaction between the Bitcoin and Litecoin are now much more efficient. The only people that know of this transaction taking place are the parties involved. This is a massive breakthrough for everyone in the cryptocurrency space. If there now is no need for an exchange or middleman, the system of decentralization in the fullest extent has arrived. This will open a huge gateway for a mainstream adoption of cryptocurrencies being used for real-world purchases. As it will be much more cost efficient to transact with Litecoin than Bitcoin by a substantial amount.
This can be compared to, in its current state, thinking of Bitcoin as a form of digital gold. You probably wouldn’t go to the grocery store and make a payment of 200$ in Bitcoin for your groceries. Instead, you would transfer 200$ worth of digital gold to a form of currency that can make the payment nearly instant and for a nearly 0% fee. It is solving a major problem that currently exists in the exchanging between the two currencies as well as opening the doors for a major movement of mainstream adoption in the currency. What are your thoughts? Do you see this being a huge use case for Litecoin and sending its price soaring within the near future? Or is this just another upgrade to the network that will merely fizzle out of the news soon? Leave your thoughts below!