An atomic swap is a technology that enables the exchange of one cryptocurrency for another without the need for a trusted third party or centralized exchange. These swaps occur directly between the parties involved using smart contracts. The term “”atomic”” refers to the fact that the transaction is indivisible; it either happens entirely or not at all, ensuring that neither party is at risk of losing their funds or failing to receive the other’s funds.
Atomic swaps can be conducted between different blockchains (cross-chain swaps) or within the same blockchain. They are hailed for increasing decentralization and reducing reliance on intermediaries in cryptocurrency trading. However, atomic swaps require a high level of technical compatibility between the involved blockchains and have not yet seen widespread adoption due to technical complexities and liquidity issues.