SparkSwap cryptocurrency exchange built on the Lightning Network offers peer to peer trading across different blockchains. It also allows users to trade Bitcoin and Litecoin by using atomic cross chain swaps over the Lightning Network. Cryptocurrency trading on centralized exchanges requires investors to deposit their digital assets with them. SparkSwap allows users to keep full control over their assets.

Technology driving the project

The Lightning Network is a second layer scaling solution and a payment protocol. It allows fast transactions between two users at cheaper transactions costs by creating a secure channel between the sender and receiver. This channel involves creating a multisig wallet by the two parties which requires two digital signatures. The wallet now holds a finite amount of cryptocurrency. The wallet address is saved on the blockchain. All transactions are now done in this channel and the information is stored on an updated balance sheet. The sheet is signed by both the parties on each transaction. No changes are made to the information stored on the blockchain. The channel is closed and the remaining balance is updated on the blockchain once all transactions are finished.

Details about the project

SparkSwap works by finding counterparties who agree on the prices of the currencies to be traded. It accomplishes this by using the SparkSwap relayer and then executes the cross-chain swaps over the Lightning Network. Transaction times on SparkSwap are comparable to traditional exchanges with trades completing in less than a second. Only the Bitcoin/Litecoin pair is currently supported with more Bitcoin pairs to be added soon. The SparkSwap software is officially in a pre alpha state and is not on the mainnet. But users can test the swaps on Bitcoin and Litecoin testnet.

Potential Benefits

Attacks on cryptocurrency exchanges have led to huge amount of cryptocurrencies being stolen. Traditional exchanges involve the risk of investors digital assets being frozen by the local government. SparkSwap offers users complete control over their assets. The peer to peer system allows investors to trade directly with other investors without the involvement of any third party.