Atomic Swap Specification for Confidential Assets

The Atomic Swap Specification for Confidential Assets defines a protocol for two parties to exchange distinct asset types on the Liquid Network without requiring a trusted intermediary. Unlike simple Bitcoin HTLCs, this standard must operate within Liquid's unique transaction model, where asset types and amounts are cryptographically blinded by default. The specification details how to construct, verify, and settle Hashed Time-Locked Contracts (HTLCs) that correctly handle the blinding factors, asset commitments, and range proofs inherent to Confidential Transactions, ensuring that a swap is either completed fully or refunded to both parties.

For DEX builders, wallet developers, and exchange integration teams, this standard is the foundational primitive for non-custodial order books and peer-to-peer trading on Liquid. The core challenge it solves is the cross-asset blinding problem: when a swap involves a confidential input, the counterparty cannot independently verify the asset type or amount without explicit unblinding. The specification defines the necessary multi-step reveal process, where participants exchange blinding keys and partial signatures in a specific sequence, allowing each party to validate the swap's terms before committing their funds. This prevents scenarios where a malicious actor could substitute a worthless asset or incorrect amount inside a blinded commitment.

Implementing this specification correctly requires rigorous handling of the time-locked refund paths and the secure exchange of cryptographic material off-chain. A flawed implementation can lead to permanent loss of funds if a refund transaction is invalid or if a party fails to reveal a blinding key before a timeout. Chainscore Labs can review atomic swap implementations for cryptographic correctness, assess the security of the off-chain communication layer, and verify that the refund and claim transaction logic is robust against race conditions and chain reorgs on the Liquid sidechain.

The Atomic Swap Specification for Confidential Assets defines a protocol for trustlessly exchanging two assets on the Liquid Network without relying on a centralized intermediary. It adapts the standard Bitcoin Hash Time-Locked Contract (HTLC) pattern to operate within Liquid's Confidential Transactions (CT) framework, where asset types and amounts are cryptographically blinded. The core challenge is that a standard HTLC requires the network to publicly verify the asset type being claimed, a condition that conflicts with Liquid's default privacy model. This specification resolves the conflict by introducing a modified script pattern that allows the swap contract to enforce the correct asset type without permanently revealing it on-chain.

The mechanism uses a OP_DROP-based script that commits to the hash of the expected asset type. When a participant claims the swap, they must provide the unblinded asset tag as a witness, which the script hashes and compares against the pre-committed value. This ensures the contract can only be redeemed with the correct Issued Asset or L-BTC, while the asset type remains hidden from third-party observers until the moment of settlement. The specification also addresses the blinding of amounts: the contract logic itself does not verify the amount, as this is handled by the CT rangeproofs and explicit fee checks at the transaction level. This separation of concerns keeps the on-chain script efficient while relying on Liquid's native cryptographic proofs for value integrity.

For DEX builders and wallet integrators, this standard introduces a critical dependency on correct blinding factor and nonce management. The participant constructing the funding transaction must generate a shared secret for the swap and coordinate the blinding of outputs with the counterparty off-chain. Any error in the multi-party computation of these blinding factors can lead to an unclaimable contract or a privacy leak. Implementations must also handle the timeout path correctly, ensuring that refunds are spendable after the locktime expires without relying on the counterparty's cooperation. Chainscore Labs reviews atomic swap implementations for cryptographic correctness in the blinding workflow, script integrity, and the security of the off-chain negotiation protocol.