Bitcoin is probably the best-known cryptocurrency in the world today, but there are many others, each implementing different technical features.
Exchanging one cryptocurrency for another often involves using “bridges” provided by companies that hold various cryptocurrencies.
Unfortunately, this approach has led to security issues and large-scale thefts.
In response, researchers at TU Wien have developed a novel protocol called “Glimpse” that enables the secure and efficient exchange of cryptocurrencies in a completely decentralized manner, without relying on centralized providers.
This protocol opens up new possibilities for the crypto world and has been accepted for presentation at the USENIX Security Symposium.
Cryptocurrencies, like Bitcoin, store transaction records in a public ledger called the blockchain. Transactions can be more complex than simple bank transfers and can involve programmable conditions known as “smart contracts.”
These contracts are verified at a later stage to ensure that the specified conditions are met, completing the transfer if successful.
Cross-currency transactions, where one cryptocurrency is exchanged for another, are more complicated and not supported by default.
The Glimpse protocol addresses this challenge by enabling efficient, decentralized, and secure cross-currency transactions. The research was conducted in collaboration between TU Wien and Pantos, a decentralized multi-blockchain token system.
Imagine someone wants to exchange their Bitcoins for Ethereum. With the Glimpse protocol, the Ethereum owner generates a random number and shares it with the Bitcoin owner.
A smart contract is then created in the Ethereum blockchain, guaranteeing the transfer of a specific amount of Ethereum to the Bitcoin owner, but only after certain conditions are met. In the Bitcoin blockchain, the Bitcoin owner transfers the Bitcoins to the Ethereum owner, including the random number to enhance security.
By utilizing blocks from both blockchains and an agreed-upon number of subsequent blocks, the Bitcoin owner can prove on the Ethereum blockchain that the transfer occurred, enabling the final transfer of the agreed amount of Ethereum.
Efficiency and compatibility were crucial factors in developing the Glimpse protocol. The protocol had to prove the transfer using a relatively small amount of data. If large portions of a blockchain were required, the process would become impractical.
Additionally, the protocol aimed to be compatible with existing blockchains, supporting as many cryptocurrencies as possible.
The Glimpse protocol can be seamlessly integrated into existing cryptocurrency software. The research team is in discussions with Bitpanda, a platform with close collaboration ties.
The potential of the Glimpse protocol extends beyond cryptocurrency exchange. It can be used to express crypto-loans within smart contracts and facilitate other decentralized financial instruments, including asset migrations and token wrapping/unwrapping.
The Glimpse protocol developed by researchers at TU Wien introduces a secure and decentralized approach to cryptocurrency exchange. It enables users to exchange different cryptocurrencies without relying on centralized exchanges, offering enhanced security and efficiency.
With its focus on compatibility and potential for expanding decentralized finance instruments, Glimpse has the potential to shape the future of the crypto world.