research-article

On the optionality and fairness of Atomic Swaps

Authors:

Jiangshan YuAuthors Info & Claims

AFT '19: Proceedings of the 1st ACM Conference on Advances in Financial Technologies

Pages 62 - 75

https://doi.org/10.1145/3318041.3355460

Published: 21 October 2019 Publication History

Abstract

Atomic Swap enables two parties to atomically exchange their own cryptocurrencies without trusted third parties. This paper provides the first quantitative analysis on the fairness of the Atomic Swap protocol, and proposes the first fair Atomic Swap protocol with implementations.

In particular, we model the Atomic Swap as the American Call Option, and prove that an Atomic Swap is equivalent to an American Call Option without the premium. Thus, the Atomic Swap is unfair to the swap participant. Then, we quantify the fairness of the Atomic Swap and compare it with that of conventional financial assets (stocks and fiat currencies). The quantification results show that the the Atomic Swap is much more unfair on cryptocurrencies than on stocks and fiat currencies in the same setting. Moreover, we use the conventional Cox-Ross-Rubinstein option pricing model in Finance to estimate the premium, and show that the estimated premium for cryptocurrencies is 2% ~ 3% of the asset value, while the premium for stocks and fiat currencies is approximately 0.3%. Furthermore, we propose two fair Atomic Swap protocols, one is for currency exchange and the other is for American Call Options. Our protocols are based on the original Atomic Swap protocol, but implement the premium mechanism. Blockchains supporting smart contracts such as Ethereum support our protocols directly. Blockchains only supporting scripts such as Bitcoin can support our protocols by adding a simple opcode. Finally, we provide the reference implementation of our protocols in Solidity, and give detailed instructions on implementing our protocols with Bitcoin script.

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Index Terms

On the optionality and fairness of Atomic Swaps
1. Security and privacy
  1. Network security
    1. Security protocols

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cover image ACM Conferences

AFT '19: Proceedings of the 1st ACM Conference on Advances in Financial Technologies

October 2019

240 pages

ISBN:9781450367325

DOI:10.1145/3318041

Copyright © 2019 ACM.

Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for components of this work owned by others than ACM must be honored. Abstracting with credit is permitted. To copy otherwise, or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. Request permissions from [email protected]

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Published: 21 October 2019

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AFT '19: 1st ACM Conference on Advances in Financial Technologies

October 21 - 23, 2019

Zurich, Switzerland

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https://doi.org/10.1016/j.jnca.2024.104044
Kajita KOhtake GTakagi T(2025)Consecutive Adaptor Signature Scheme: From Two-Party to N-Party SettingsProvable and Practical Security10.1007/978-981-96-0954-3_2(23-42)Online publication date: 1-Feb-2025
https://doi.org/10.1007/978-981-96-0954-3_2
Augusto ABelchior RCorreia MVasconcelos AZhang LHardjono T(2024)SoK: Security and Privacy of Blockchain Interoperability2024 IEEE Symposium on Security and Privacy (SP)10.1109/SP54263.2024.00255(3840-3865)Online publication date: 19-May-2024
https://doi.org/10.1109/SP54263.2024.00255
De Silva AThakur SBreslin J(2024)xPayments: Cross-Domain End-to-End Payment Protocol using Payment Channel Network2024 IEEE 29th Asia Pacific Conference on Communications (APCC)10.1109/APCC62576.2024.10768001(423-428)Online publication date: 5-Nov-2024
https://doi.org/10.1109/APCC62576.2024.10768001
Zhuo FSong ZJia LZhang HLi ZSun Y(2024)Enabling Fast Settlement in Atomic Cross-Chain SwapsSecurity and Privacy in Communication Networks10.1007/978-3-031-64948-6_20(395-412)Online publication date: 13-Oct-2024
https://doi.org/10.1007/978-3-031-64948-6_20
Monika Bhatia RKumar M(2024)An extensive multivocal literature review of blockchain technologyTransactions on Emerging Telecommunications Technologies10.1002/ett.503735:11Online publication date: 23-Oct-2024
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Wang GWang QChen S(2023)Exploring Blockchains Interoperability: A Systematic SurveyACM Computing Surveys10.1145/358288255:13s(1-38)Online publication date: 13-Jul-2023
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Han PYan ZDing WFei SWan Z(2023)A Survey on Cross-chain TechnologiesDistributed Ledger Technologies: Research and Practice10.1145/35738962:2(1-30)Online publication date: 8-Jun-2023
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