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Onchain Swaps

Implement atomic swaps and cross-chain trading directly on Bitcoin using Spark’s native capabilities.

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Overview

Onchain swaps enable trustless trading between different assets without intermediaries, leveraging Bitcoin’s security and Spark’s speed.

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Prerequisites

  • Understanding of atomic swaps
  • Familiarity with Bitcoin scripting
  • Spark SDK knowledge
  • Basic cryptography concepts

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Getting Started

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Atomic Swap Basics

Atomic swaps allow two parties to exchange different cryptocurrencies without trusting each other or a third party.

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Key Components

  • Hash Time-Locked Contracts (HTLCs): Core mechanism for atomic swaps
  • Preimage Secrets: Cryptographic keys that unlock funds
  • Time Locks: Automatic refund mechanisms
  • Multi-Signature: Enhanced security for swap execution

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Implementation

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Basic Atomic Swap

// Create an atomic swap
const swap = await createAtomicSwap({
  assetA: 'BTC',
  assetB: 'USDT',
  amountA: 100000, // sats
  amountB: 1000, // USDT
  counterparty: 'spark_address',
});

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Swap Lifecycle

  1. Initiation: One party creates swap proposal
  2. Acceptance: Counterparty accepts terms
  3. Funding: Both parties fund swap contracts
  4. Execution: Atomic exchange of assets
  5. Completion: Funds released to respective parties

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Advanced Features

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Cross-Chain Swaps

  • Bitcoin ↔ Ethereum
  • Bitcoin ↔ Solana
  • Bitcoin ↔ Other L2s
  • Multi-hop routing

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Automated Market Making

  • Liquidity provision
  • Price discovery
  • Slippage protection
  • Fee optimization

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Flash Swaps

  • Instant execution
  • Collateral-free trading
  • Arbitrage opportunities
  • Risk management

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Use Cases

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DeFi Applications

  • DEX Integration: Decentralized exchange functionality
  • Yield Farming: Automated trading strategies
  • Arbitrage: Cross-chain price differences
  • Liquidity Mining: Incentivize swap participation

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Enterprise Solutions

  • Treasury Management: Corporate asset swapping
  • Payment Processing: Multi-asset payment rails
  • Risk Hedging: Portfolio rebalancing
  • Compliance: Regulated swap execution

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Consumer Applications

  • Portfolio Management: Automated rebalancing
  • Payment Flexibility: Multi-asset payments
  • Investment Tools: Dollar-cost averaging
  • Cross-Border: International asset transfers

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Security Considerations

  • Smart Contract Audits: Thorough security reviews
  • Time Lock Management: Proper timeout handling
  • Preimage Security: Secure secret generation
  • Multi-Signature: Enhanced key management

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Best Practices

  • Fee Optimization: Minimize transaction costs
  • Slippage Protection: Price impact management
  • Liquidity Management: Maintain adequate reserves
  • User Experience: Intuitive swap interfaces

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Next Steps

  • Implement basic atomic swap functionality
  • Add cross-chain support
  • Build automated market making
  • Deploy production-ready swap platform