Trustless Overcollateralized Loans Using Atomic Swaps

Summary

The paper proposes atomic loans, a way to create overcollateralized debt instruments between cryptocurrencies on different blockchains using atomic swap technology. The design aims to let participants transact without relying on a trusted intermediary. Potential uses include helping cryptocurrency holders obtain fiat or stablecoin access for use in legacy financial systems, and providing leverage for margin trading.

For defaults, the proposal introduces a bidding process to liquidate the posted collateral, intended to distribute its value more fairly. This excerpt explains the concept and its proposed use cases, but provides no implementation details, measured results, or comparison with existing lending systems. It also does not specify collateral valuation, loan terms, or how the design handles market volatility and liquidation risk. The described mechanism is therefore a proposal, not evidence of a proven lending or trading strategy.

Key ideas

• Atomic swap technology is proposed as a basis for cross-chain, intermediary-free loans.
• The debt instruments are overcollateralized with cryptocurrency assets.
• Potential uses include fiat or stablecoin access and leverage for margin trading.
• A collateral auction by bidding is proposed for handling defaults.
• The excerpt offers no implementation evidence or evaluation of risks and performance.

Tags

# Atomic Loans: Cryptocurrency Debt Instruments


# Atomic Loans: Cryptocurrency Debt Instruments









Atomic swaps enable the transfer of value between the cryptocurrencies of various blockchains without the need to trust an intermediary. In this paper, we propose the concept of atomic loans, which utilize atomic swap technology to allow market participants to create overcollateralized debt instruments in a trustless and disintermediated manner. The primary use cases for atomic loans include enabling fiat/stablecoin access for cryptocurrency holders to participate within legacy systems, as well as enabling leverage for margin trading. We also introduce a bidding process for liquidating collateral in the case of default which provides the ability for a more fair distribution of collateral.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.