Atomic Swaps, Lightning Networks, and Litecoin.

For now Bitcoin remains the dominant coin in the cryptocurrency market place. While Litecoin is no longer number two or even number three – those spots have been taken by Ethereum and Bitcoin Cash – but it still remains in the top ten. Even with Litecoin losing it’s status as one of the top three coins, I think Litecoin is a strong contender for continuing to hold it’s place in the top ten cryptocurrencies, for a few reasons but mainly, atomic swaps. I think atomic swaps are the key to saving Bitcoin and will empower Litecoin even more.

Background:

Bitcoin, for the majority of last year, was suffering through many forks like Bitcoin Cash and Bitcoin Gold for one reason – Bitcoin Core was having issues with scaling. They were trying to find a solution to that problem, some solutions were segwit or raising the block size limit. Ultimately Bitcoin Core implemented segwit but nothing else.

While network fees have dropped down to a few dollars it is still about 100 times more than Litecoin’s transaction fees. However Charlie Lee, Litecoin’s glorious creator, decided to implement segwit on litecoin which gives the ability for litecoin to preform atomic swaps with Bitcoin and other cryptos. That is wonderful news! But what are atomic swaps?

Atomic Swaps:

Right now if someone wants to trade Bitcoin for litecoin, you have to pass through a cryptocurrency exchange, trade it with a real person, or purchase it at an Litecoin ATM. Storing funds on an online exchange pose risks for long term holders and serious investors. It’s far safer to use a cold storage wallet or buy a hardware wallet.

But with Atomic Swaps anyone is able to trade their coins with another person without using an exchange. Atomic Swaps are a means of decentralizing exchange down to the individual level. And even better the Atomic Swaps happen in a matter of seconds.

To help us understand this better I’ll give an example. You’re in a shop that only accepts Bitcoin but you own litecoin. Rather than going through a slow route of using a exchange to purchase Bitcoin and transfer it off an exchange to the person’s wallet (getting fees taken out along the way), you can just use an atomic swap. It takes a matter of seconds. It works by using a swap contract – like a smart contract – but the currencies now coexist in the same environment.

The use of Atomic Swaps will provide Litecoin and Bitcoin with greater liquidity and produce more use cases as it will be easier to use them for everyday purchases. Although Atomic Swaps aren’t the only reason why I’m bullish about LTC. Anything that reduces the cost to transact on the network is a big deal and the Lightning Network proposal is just that.

Lightning Network:

I won’t explain how the lightning network works but in deciding if I would explain it or not I came across this response on Stackexchange that does an excellent job at explaining it more in-depth.

The Lightning network offers instant payments without the need to worry about confirmation times. With off-chain transactions, payments are faster and fees are reduced. But the lightning network is just another way for cryptocurrencies to scale because if mass adoption happens – as we all want it to – scaling will be a massive hurdle for cryptocurrencies to overcome.

So the Scalability problems finds an important off-chain solution. The Lighting Network can process millions to billions of transactions per second. The lightning Network would allow people and companies to process transactions – and do so instantly. This gives Litecoin and other Lighting Network cryptocurrencies a huge advantage.

How might Atomic Swaps and the Lightning Network work together?

If you are a holder of Bitcoin but want to make a micropayment, for say a cup of coffee, you can do an Atomic Swap to Litecoin, then perform the purchase.

But this will only be necessary if Bitcoin, using the lightning network, still has higher fees than Litecoin. And if the fees for using Atomic Swaps are less than the normal Bitcoin network fee. This remains to be seen if this will take shape like developers are theorizing. But it wouldn’t make sense for a solution to be in development if it didn’t work as intended.

Summary/TLDR:

– Atomic Swaps are a form of decentralized, instantaneous exchange.
– Lightning Network can do millions to billions of transactions with little to no worry about confirmation times.
– When they are released it will be a big deal for both Bitcoin and Litecoin.
– In my opinion Litecoin is a good long term hold for this year – banking on the idea the Lightning Network and Atomic Swaps get implemented.

Disclosure:

I try to be as unbiased as possible but my opinions are my own. I recently bought some LTC after learning more about Atomic Swaps and the Lightning Network. LTC represents about 1-2% of my portfolio.

As always, do your own research and do not invest more than you can afford to lose. Best of luck.