A portal to unknown worlds. Image by ƝƖƇƠ ƬƖMΣ™ via flickr.com. License: Creative Commons

Portal, an atomic swaps platform, receives a $34 million investment. This shows a possible trend in the market – and why it is sometimes worth making a product more and more complicated.

Portal wants to make it possible to exchange Bitcoin for other cryptocurrencies and tokens in a decentralized manner, i.e. from wallet to wallet and without a middleman, both on the main chain and at higher levels such as Lightning or Arbitrum.

Portal will now receive $34 million for this program. Investors include companies such as Coinbase Ventures, Arlington Capital, OKX Ventures and Gate.io. They are investing in a technology that is intended to make them partly superfluous: atomic swaps.

The big difference with decentralized exchanges like Uniswap is that atomic swaps can be done from blockchain to blockchain, for example from Bitcoin to Ethereum or from Bitcoin to Litecoin, or as recently implemented by Wasabi, from Bitcoin to Monero.

The greater the pressure on exchanges to implement regulatory harassment towards their users and the more frequently so-called delistings of privacy coins such as Monero occur, the more important atomic swaps become. They enable trading in cryptocurrencies that is essentially unregulated. Even if used only marginally, they limit the reach of regulation.

The idea is not new, and Portal wasn’t just founded yesterday. The platform has already received $8.5 million in investment capital in 2021. In the three years since then, it still hasn’t gone live. After all, a testnet is online.

The basic concept of atomic swaps is as simple as it is magical. On a blockchain like Bitcoin, so-called HTLCs (Hash Time Locked Contracts) are used, like Lightning, which make it possible to redeem a transaction using a secret OR after a certain time has elapsed. The combination of such HTLCs makes it possible to make the exchange of coins on two blockchains “atomic”, i.e. reduced to a single action. As soon as an actor triggers the coins intended for him, he reveals the secret that the trading partner needs to secure his coins. You can find out exactly how atomic swaps based on HTLCs work in this article.

The matter itself is quite complicated. But Portal has high demands: The atomic swaps should not only take place between blockchains like Bitcoin, but also reach other blockchains like Ethereum, including the higher layers like Lightning or Arbitrum, and not only cover native coins like BTC, ETH or XMR, but also Tokens, NFTs and Ordinals. This is where the story gets pretty complicated.

Countless questions arise when you want to implement atomic swaps: How do you create enough liquidity? Especially with small coins? Where do you get the prices from? Is there an order book system or automatic market makers, like Uniswap, or both? With so many players, how can you prevent fraud or spam attacks without causing the system to freeze?

A simple platform for decentralized, cross-blockchain exchange became a complex structure of order books, oracles, automatic market makers, AI agents and liquidity providers that make coins available on a blockchain and receive parts of the trading fees in return. The construct is held together by an intermediate layer, the attestation chain, on which validators who stake $PORTAL tokens monitor, verify and document the entire trading process.

For the investors who made more than $34 million available to Portal, this attestation Chai may have been particularly attractive. After all, their native token promises a proven way to liquidate the investment for a profit. The previous investors, who raised 8.5 million in a kind of crowdfunding in 2021, are not very happy about Portal’s slow start. The developers promised to compensate them with equity, i.e. shares – most likely tokens – when the platform was launched.

On the crypto market, Portal’s platform, once it goes live, will have to compete with various established providers. On the one hand, these are the central exchanges, which support both Lightning and Arbitrum, and on the other hand, there are the decentralized exchanges, such as Uniswap, which are already able to swap across blockchains thanks to central and decentralized bridges. Portal’s bet now is that it will be easier to make Porto’s complex concept user-friendly rather than making the existing bridges more secure.

Source: https://bitcoinblog.de/2024/02/13/34-millionen-dollar-fuer-atomic-swaps/

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