Atomic swapping is smart contract technology that enables the exchange of one cryptocurrency with another without having to rely on centralized intermediaries such as exchanges or being prone to counterparty risk when not using an intermediary. The first successful atomic swap was performed between Decred and Litecoin in September 2017 and since then many other coins have been exchanged between each other. The basic principle of atomic swapping is Hash TimeLock Contracts (HTLC) which involves both parties signing a time-bound contract between each other which generates a cryptographic hash function. If both parties do not sign and transfer the funds within the set timeframe, the exchange is not executed.
Atomic swapping removes many obstacles when exchanging one cryptocurrency for another. Firstly, the cryptosphere is very fragmented and users are often having to create accounts on various exchanges to be able to exchange the coins of their choice. Secondly, each transaction between the different exchanges is costly – not only in the withdrawal fees, but also the increased time delay as centralized many exchanges require as much as 30 block confirmations before the funds are deposited into the user's wallet. Thirdly, the fees that occur whenever users are forced to exchange their cryptocurrencies into intermediate coins such as ETH or BTC to buy the desired cryptocurrency and the price fluctuations that can occur between these exchanges can be costly.
On a final note, users often encounter ‘wallet under maintenance’ or ‘wallet unavailable’ when wanting to transfer their funds from centralized exchanges, which has led many to believe that this is a mechanism to control cash flow. With the Metamorph platform and morphs (atomic swapping), you are always in 100% control of your funds and they will always be available to you. There is no backlog of transactions waiting to be executed or broadcast to the blockchain, nor are there any impractical issues such as running out of gas when exchanging one cryptocurrency for another. The full amount and the transaction rate is always available before a morph is commenced.