ChiaSwap - BTC/XCH cross-chain trading now possible!

What is ChiaSwap?

In January 2022, the project ChiaSwap was revealed. It defines a protocol that enables the exchange of XCH for BTC and vice versa. It utilizes the Lightning Network for this purpose. The project envisions a decentralized exchange without the involvement of third parties, as seen in centralized exchanges. ChiaSwap was not intended to be a user-friendly tool itself. Instead, it serves as a protocol upon which more user-friendly solutions can be built. To understand how ChiaSwap works, it's essential to first learn about the Lightning Network.

What is the Lightning Network?

The Lightning Network is a network that operates on the blockchain, specifically referred to as a second layer or off-chain solution. It aims to facilitate fast peer-to-peer transactions. The Lightning Network gained popularity mainly due to its integration with Bitcoin, but it can function with other blockchains as well.

The Lightning Network is independent of Bitcoin, although it is related to its blockchain. It has its own nodes and software, but it can communicate with the main blockchain. Entering or exiting the Lightning Network requires the creation of a specific transaction on the first-layer blockchain. Unlike traditional blockchain transactions, those occurring within the Lightning Network are lightning-fast. They do not require waiting for block confirmations from the first-layer network.

To fully utilize the Lightning Network, one must exchange their on-chain resources (e.g., Bitcoins) for off-chain coins. The integrated mechanism called Submarine Swap handles these types of transfers. It is a specific derivative of atomic swaps, enabling direct exchange between wallets for different assets in two independent networks. In the case of Submarine Swap, this refers to the mutual transfer of resources between the on-chain and off-chain worlds. In simpler terms, if you move your Bitcoins into the Lightning Network, they become second-layer assets.

How does ChiaSwap work, then?

ChiaSwap adopts the solutions developed by the creators of the Lightning Network. This protocol utilizes the Submarine Swap mechanism to facilitate exchanges between second-layer Bitcoins and Chia.

ChiaSwap's protocol gained recognition from the community less than a year after its release when it was integrated into a solution called Chia Crypto Utils.

Brief description of Chia Crypto Utils

Chia Crypto Utils is a set of tools designed to improve the usage of the Chia blockchain. The author provides it as an object-oriented model. As it was written in the Dart programming language, it can be quickly adapted for mobile or web applications.

What can we expect in the future?

On December 12, 2022, the Chia Crypto Utils included the ChiaSwap protocol. It was a breakthrough event for this technology as it opened the door for further adaptation. Less than 24 hours later, the solution was tested by the dexie exchange. Its creators successfully exchanged second-layer Bitcoins for Chia without the need for intermediaries' intervention. Therefore, it can be expected that in the future, the dexie exchange's homepage will feature offers covering cryptocurrencies from other blockchains.

These achievements are particularly exciting as many Proof of Work-based projects are currently becoming less profitable. There will be a need to find an ecological and secure alternative, and Chia Network is likely to be one of them. While it is possible to exchange digital assets using centralized exchanges, such solutions are more challenging, time-consuming, and involve greater risks and additional fees. If decentralized exchanges successfully adopt the ChiaSwap protocol, these transfers will be easier and more convenient than ever before.