An Atomic Swap is a trading technique that allows two different parties the ability to swap, or exchange, one cryptocurrency for a completely different cryptocurrency, all without involving a 3rd party like a centralized cryptocurrency exchange (CEX), such as Coinbase.
The transaction happens with the use of a smart contract, allowing the transaction to happen even if the two parties don’t know each other.
This is accomplished through a series of smart contract rules and conditions that must be fulfilled within a specific amount of time before the trade actually happens.
The smart contract generates cryptographic proofs, confirming the funds that each party wants to exchange.
Atomic swaps are beneficial in that they’re fast.
They also don’t depend on intermediaries that could introduce security concerns simply because you use them.
They offer the parties involved more control since everything happens from a personal wallet and not a wallet with another intermediary.
Atomic Swaps can be more affordable than trading on traditional centralized exchanges.