The world of bitcoin trade and digital currencies is about to change as SparkSwap is all set to make its debut in the fintech world. Being the first ever crypto exchange to be built on the Lightning Network, it aims to provide its users with a digital space where they can trade both, bitcoins and altcoins, super efficiently without the involvement of a third party or any sort of intermediary. Usually, third parties are a part of the crypto trade system and users have to deposit assets with them.
SparkSwap’s founder, Trey Griffith revealed that, for now the trade would be limited to two blockchains, bitcoins and altcoins. But also ensured that more blockchains will be supported by the system in near future. He did, however, emphasize on the quick transaction time, which he claims is comparable and could rival some of the leading centralized cryptocurrency exchanges.
Griffith further added,
In an industry that, at times, seems to value hype and white papers over delivered, working software, we’ve opted for the latter. Our software is in a pre-alpha state, but we’ve successfully used it to execute BTC/LTC trades on the Bitcoin and Litecoin test nets.
How SparkSwap Eliminates the Third Party?
The SparkSwap software is primarily made up of two components.
The first is the software, which is run by users, called Broker. The broker’s function is to interpret user actions and further convert them in to network actions. Moreover, it carries out payment channel network swaps, as well as manages users wallets and the private keys.
The second component is known as the Relayer, which is a software operated by the staff members. What it does is, it connects the broker who wishes to execute a monetary swap, provides order book update and lessens the chances of fraud and of market manipulation. Furthermore the Relayer supports users with settling on swap prices. And executes trades over payment channel networks like the Lightning Network itself, which in turn eliminates the need for third parties.
With SparkSwap, you no longer need to choose between fast settlement, liquid trading pairs, and maintaining control of your assets. Your assets are no longer exposed to theft or loss by exchanges, either from bad actors or local governments
The digital world of cryptocurrency is evolving every given day. Crypto enthusiasts were of the opinion that the Lightening Network was strictly limited to bitcoin. Which isn’t necessarily true.
Before the idea of SparkSwap was conceived, bitcoin and altcoin exchanges were made through a process called ‘Atomic Swap’, first described back in 2013.
How Did the Atomic Swap Work?
Let’s say that if an individual was looking to trade altcoins for bitcoins, all the while another individual wanted to trade bitcoins for altcoins, they could carry out an exchange by submitting two separate transactions, one to the bitcoin blockchain and the other to the altcoin blockchain respectively.
The bitcoin then, would be sent to the first individual from the second individual, who can claim it. But there was a catch, he could only claim it if he was able to reveal a secret number as part of the on-chain claim-transaction. This secret number played a vital role for both the parties involved as this number allows the second individual to claim the altcoins from the respective blockchain, all the while preventing fraud and ensuring both the parties involved get their due funds.
The process worked, but at the same time it was complicated. The Lightening Network built SparkSwap keeping the core idea of the atomic swap, which was a trust less process where the chances of fraud are minimized and each party gets their funds timely. However SparkSwap is a step up from the previous process in the sense that it connects not two blockchains rather two payment channels, thus allowing individuals to carry out trade without having to build trust with each other.
We still have plenty of work to do to take this technology to mainnet and live trading, but we’re ready for people to start trying out the swaps themselves so we can improve the technology as a community