Bitcoin’s scalability solution Lightning Network – a two-layer technology enabling off-chain transactions – has made significant progress over the last year. But one thing that lags in the development is that the Bitcoin address and Lightning address are not compatible. It means that the direct money transfer from Bitcoin address to Lightning address, or vice versa, is not possible.
Currently, this fund-transfer is possible by implementing an additional step of transferring lightning funds to user’s BTC account. The Lightning network aims to cater to more users on the Bitcoin network and improve transactions speeds while keeping costs low.
Lightning Labs developer Alex Bosworth has proposed a solution called “submarine swaps” to solve this incompatibility issue. This interoperability solution takes inspiration from atomic swaps for seamless fund transfers between off-chain lightning and on-chain bitcoin platform. Atomic Swaps is a technology that facilitates trading between digital assets of different blockchains without the need of middle-men.
‘Submarine swaps’ is currently in the pilot phase of testing, done live Lightning network. Bosworth has warned that ‘submarine swaps’ is still in the development phase, and using it can be risky at the moment.
Testing has started on mainnet submarine swaps. Talking with partners who want to be a part of deploying swap providing liquidity, integrate swaps into their platforms, and help complete mainnet hardening dev work. Still lots to build but it’s more fun to try on mainnet #reckless
— Alex Bosworth ☇ (@alexbosworth) August 8, 2018
Currently, the submarine swaps only support one-way traffic of fund-transfer from Bitcoin blockchain to the lightning network. The developer is also working on a reverse possibility. Additionally, Bosworth also assumes a future scenario where the technology is available for other cryptocurrencies as well!
Refilling Lightning Channels Using Submarine Swap
Developer Bosworth has proposed several use cases for the submarine swap. An important one is the need to “refill” the lightning channels. Currently, Lightning network users have to set up a channel with a fixed amount of money in them. The process of setting up new channels costs on-chain transaction fees, which increases with growing users of the cryptocurrency.
To overcome this issue, another approach is refilling the existing channel using the submarine swap and trade the on-chain funds for additional off-chain funds. Submarine swap’s crypto-to-crypto exchange could also prove to be a game changer in the coming times. Although ‘atomic swaps’ is perceived as the chief technology working behind it, it still requires lightning to be enabled on both digital currencies getting swapped. On the other hand, submarine swaps demand lightning enabled on only one side.
Bosworth believes that this could reduce the work of developers who wish to support a multitude of different coins. In a lecture, delivered earlier this year, Bosworth talks about “utopian swap future” with a variety of different swaps. He also talked about HTLCswaps that would allow users to trade Lightning payments for data.
However, he says that implementing Submarine Swaps involves “a lot of challenges” especially when the blockchain network has higher transaction volumes. Bosworth says “My concept was that swaps could be something that were very cheap to provide, like that a mobile phone could do.”
Bosworth also envisions a future where submarine swaps could be performed easily through smartphones.