Cryptocurrencies like Bitcoin, Ethereum, and Ripple tend to grab most of the headlines. But if recent rumblings are to be believed, two other prominent altcoins may be about to create their own waves.
Litecoin (LTC) is the silver to Bitcoin’s gold and it’s meant to be a functional currency for daily use in the future. Monero (XMR) is arguably the premiere privacy token out there, and it’s meant to afford anonymity and censorship resistance. Back in January, LTC founder Charlie Lee met with Riccardo Spagni, a project leader of XMR. The meeting was followed by a series of tweets that have kicked speculation into high gear.
First, there was this tweet from Spagni (@fluffypony):
Charlie Lee (@Satoshi Lite) quickly chimed in to point out that Spagni was kidding, but also to approve of the idea of a LTC/XMR collaboration.
Atomic swaps allow for two different cryptocurrencies to be exchanged, instantly and in a secure manner, across two different blockchains. They essentially cut out the need for exchanges and provide a way to facilitate P2P trades in a completely trustless way.
Segregated Witness (SegWit) was implemented in May 2017, and after this was completed atomic swaps were first tested on the Litecoin network. For those who don’t know, SegWit is a proposed solution to Bitcoin’s scaling problems. In simplified terms, it’s the process by which the block size limit on a blockchain is increased by removing signature data from transactions, freeing up space to add more transactions to the chain.
It factors into this discussion because in order for an atomic swap to occur both SegWit and the lightning network must be operational on two different blockchains. Fast forward to the fall of 2017 and this is exactly what transpired, with the first atomic swap between Litecoin and Bitcoin being successfully completed in an off-chain payment channel. Others have followed suit, and the setting is now truly primed for further development.
Although Spagni’s tweet was clearly a joke, it seems to have struck a real chord. Lee continued:
The logic of these tweets is hard to refute. Litecoin is widely used (available on almost all fiat exchanges), and atomic swaps would allow more people to buy XMR via LTC. Conversely, Charlie Lee has expressed an interest in and a desire for greater privacy (precisely like that offered by XMR). Both currencies clearly have a lot to offer each other. More than a few news outlets/blogs took this information, ran with it, and started speculating about a possible merger.
Before things get too carried away, a few clarifications are in order.
If Spagni’s suggestion that the Litecoin Enterprise Alliance would merge with the Monero Enterprise Alliance led you to think this would create a singular entity/token/blockchain, you’d be mistaken. If XMR and LTC were to truly merge, this would require something akin to a reverse fork, which, while not impossible, would likely be very messy.
The primary hurdles in this scenario would be creating new tokens and then figuring out what happens next. This might sound simple, but to ensure that this happens fairly and that the merger is a success, there would likely be a need for centralized control. This could take many forms: who defines the terms, who writes the airdrop software, what any new rules will look like, how the token allocation will be handled – all potentially problematic issues.
Because of Monero’s unique privacy features, things could be especially complicated. Crypto podcaster Mike Croteau poses the question:
“How would a merger between Monero and some other coin work, for instance, if it’s impossible to know who owns what Monero, or how much? That’s not to say there isn’t an answer to that question, but the math becomes quite a lot trickier.”
So if we’re not talking about a merger of blockchains or development foundations, what are we talking about?
What Charlie Lee really indicated in his tweets is making LTC and XMR interoperable through on-chain atomic swaps (as mentioned above) and other collaborations. Interoperable is computer science speak for compatible, or able to work together. More on this below.
Some have dismissed this incident as little more than two guys expressing admiration for each other publicly, or stating that if there ever were a chance to work together they’d be all for it. We could speculate about whether or not this will come to fruition, or we could focus on the more interesting question: should it?
As we move into a decentralized future, the use of centralized exchanges starts to feel antiquated, posing an obvious problem. Users have to risk the custody of their coins to exchange them. This problem is being tackled in more ways than just atomic swaps. Here are a few other approaches:
While other solutions are being worked on, atomic swaps remain the most exciting. The previously mentioned examples of atomic swaps were early, and somewhat isolated, incidents. There is disagreement as to the timeline they’ll be available to the public, but some believe 2018 will be their year.
According to Bitgo Engineer, Jameson Lopp:
Whether anything comes of the Twitter exchange between Lee and Spagni is anyone’s guess, but it did bring up a number of important issues. Not the least of which is what would a partnership look like in the context of two decentralized open-source blockchains?
If Litecoin and Monero do ultimately move forward in any tangible way, they may provide us with an A-list example. In the future, it’s likely that all cryptocurrencies will have the ability to swap with one another on-chain. This means no more fees, no more exchange hacks and less phishing scams. But the technology still needs to evolve to make this into a reality, and in the near-term, such a feature requires close collaboration between devs and a lot of work.
If you’d like to survey the atomic swap landscape, a site has been built that shows each crypto’s readiness.
The bottom line here is that this type of news should be of interest for not only fans of Litecoin/Monero and price speculators, but anyone who’s keen on the advancement of blockchain technology as a whole.
To use the words of Bitcoin developer Alex Bosworth: “The atomic age is coming, what cannot be swapped will be left behind.”
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