Atomic Swaps
Original HTLC
Introduction to original Atomic Swaps and their challenges
Atomic Swaps (HTLC - Hashed Time Lock Contract) enable peer-to-peer asset exchange without requiring one Network to know the state of the other. The User generates a secret and locks funds on the Source Network. Then, the Solver locks funds on the Destination Network. They exchange the secret to unlock their respective funds, with a time limit ensuring fund retrieval if the exchange fails.
The Standard HTLC Flow
1
User Lock
The User generates a Secret S and computes Hashlock HASH(S). Then, they create an HTLC, locking funds for the selected Solver in the Source Network.
2
Solver Lock
The Solver detects this HTLC and creates a counterparty HTLC with the same Hashlock. This locks funds for the User (initial amount minus the Solver Fee) in the Destination Network.
3
User Unlock
The User detects the HTLC in the Destination Network and reveals S to claim the funds.
4
Solver Unlock
The Solver detects the revealed S and reveals it in the Source Network to claim their funds.
Challenges with HTLCs
Despite their potential, HTLCs have proven impractical for real-world bridging due to three main issues:- Secret Management: Users must generate and securely manage a Secret until the counterparty completes their transaction.
- Claim Transaction on the Destination Network: Users may lack assets on the Destination Network, especially if it’s their first time interacting with that Network.
- Liveness: Users must maintain the state of the bridging process locally and actively monitor and respond to counterparty transactions.