Bitcoin Atom, an ambitious Bitcoin fork due to come into existence within the next few days, plans to solve a substantial problem in the cryptocurrency world. The project will use atomic swaps to allow users to exchange tokens at absolutely minimal costs without any intermediaries or centralized exchanges. The project also plans to integrate Lightning Swaps (LS) to power extremely fast and cheap transactions.
While the most appealing component of Bitcoin Atom is a potential solution to Bitcoin’s scalability problems, it also has a few other differentiating points. Perhaps foremost among these, Bitcoin Atom uses a hybrid consensus model that combines Proof of Work (POW) and Proof of Stake (POS), two different types of algorithms for reaching consensus, or agreement, on whether or not a transaction is valid before it is added to the blockchain. This hybrid model aims to increase network stability and decrease the threat that a majority group of miners could sabotage the system.
The current process of trading in cryptocurrencies involves several steps, as well as exchange and network fees. For example, if you want to trade Bitcoin for Ethereum, you have to create an account on an exchange such as Bittrex or Binance and place your order. However, with Bitcoin Atom, you’d be able to swap it directly (assuming you already have a wallet with some cryptocurrency to swap).
Atomic swaps are a two-step process that involves placing your order inside your node and then receiving your exchange cryptocurrency. In bypassing third-party exchanges, Bitcoin Atom users can keep their identities private, perform faster trades, and reduce trading fees.
With atomic swaps, either the trade happens, or it doesn’t. There’s no need to blindly trust that another party will fulfill their end of the bargain or to worry about your funds being sent into escrow.
Bitcoin’s scaleability issues have created a major roadblock to mainstream adoption. With the costs of a single Bitcoin transaction nearing $30 at some points over the last couple of months, many cryptocurrency evangelists are searching for a solution.
Bitcoin currently has a throughput of 3-4 transactions per second (TPS). With SegWit (an update to the original protocol), Bitcoin could theoretically get 6 TPS. Ethereum, currently number two in cryptocurrency market capitalization, has a throughput of 20 TPS. To put this in perspective, PayPal is able to process 193 TPS, and Visa averages 1,667 TPS and is estimated to be able to process more than 56,000 TPS.
For a token expected to revolutionize global payments, Bitcoin’s throughput rate doesn’t inspire confidence.
Several other Bitcoin forks have tried to address Bitcoin’s scalability issues, but they mostly focus on expanding Bitcoin’s 1MB blocksize. Bitcoin Cash, for example, increased the blocksize to 8MB, resulting in an exponentially cheaper transaction cost.
These blocksize solutions, however, are limited. The problem isn’t linear; even a 100MB blocksize poses a problem.
That’s where Bitcoin Atom comes into play.
An atomic solution
Bitcoin Atom (whose currency symbol is BCA) is a SegWit-enabled Bitcoin fork that, as mentioned above, uses “on-chain atomic swaps” and a hybrid consensus model.
This isn’t a blocksize expansion, it’s a paradigm shift in how the token operates. Instead of Bitcoin Atom attempting to change Bitcoin’s blocksize from 1MB to a hypothetical 100MB so that the network can add more stacks of transactions to the blockchain at a faster rate, it’s fundamentally changing how transactions are conducted.
As a cryptographically powered smart contract, an atomic swap creates a direct and trustless exchange.
(Note on the video above: The concept of atomic swaps has been around since 2013 but has been a work-in-progress ever since. In September 2017, Litecoin founder Charlie Lee helped perform the first LTC/BTC cross-chain atomic swap. This served as the initial proof that atomic swaps can actually work and helped serve as the stimulus for the Bitcoin Atom project.)
In a world where Bitcoin is seen as the flagship that launched a fleet of thousands of blockchain-based projects, it is starting to look more and more like an antiquated warship of yesteryear, with speedier, faster, and stronger ships being built.
As Bitcoin continues to lose market dominance, the playing field is set for competitors. These ships (forks) take the skeleton and structural integrity of Bitcoin’s blockchain and brand and tack on different features.
The biggest challenge is building a ship that floats. Forks like Bitcoin Atom are looking to implement a technology that would give them a massive competitive advantage. Implementing a solution that consistently and reliably works, however, is a challenge in and of itself. We won’t truly know how valuable the Bitcoin Atom solution is until we see it in action.
The Bitcoin Atom fork is expected to occur this week — when Bitcoin reaches its 505,888th block.