Atomic Swap
A peer-to-peer crypto trade that lets two parties exchange different coins directly without relying on a centralized exchange or custodian.
An atomic swap is a way for two people to exchange cryptocurrencies directly, usually across different blockchains, without handing funds to an exchange or other middleman. It uses smart contract-style rules, often through hashed timelock contracts, to make the trade all-or-nothing. Either both sides complete the swap and receive the agreed coins, or the transaction is canceled and the original funds are returned after a set time.
This matters because it reduces custody risk: neither trader has to trust the other person to send coins after receiving payment. For example, Alice could swap bitcoin for Bob’s litecoin using a protocol that locks both payments until each side reveals the required secret to claim the funds. If one person disappears or refuses to finish, the timelock prevents the funds from being stuck forever. Atomic swaps are used in some decentralized exchange systems, though they can be limited by wallet support, blockchain compatibility, transaction fees, and confirmation times.
Other terms in Blockchain Fundamentals
Block (Blockchain)
A block is a bundled set of blockchain transactions and metadata that is added to the chain after the network accepts it as valid.
Blockchain
A blockchain is a shared digital ledger that records transactions in linked batches and is maintained by a network of computers.
Blockchain Fork
A blockchain fork is a split or change in a blockchain’s rules that can create two different versions of the network’s transaction history.
Consensus Mechanism
A method a blockchain network uses to agree on valid transactions and the current state of the ledger without a central authority.