🔱Submarine swaps (lightning)

Submarine swaps are used to ensure atomicity for swaps between Solana & Bitcoin Lightning network.

Submarine swaps are based on a fact that lightning network payments are a form of hash-time locked contracts (HTLCs) -> in order to settle a bitcoin lightning network invoice, the receiving party must reveal a secret S with hash H(S) equal to payment hash P specified in the invoice. This fact can be used to create a similar hash time locked contract (HTLC) with same hash P on other chains to depend on sending/receiving of lightning network payment.

HTLC (hash-time locked contract)

HTLC is an agreement (smart contract) between 2 parties (A & B) consisting of hashlock & timelock. HTLC is created with 2 parameters: hash P & timelock T

Hashlock

Enables A to claim the funds from the smart contract if he is able to provide a valid secret S that hashes to pre-specified hash P, such that P = H(S). This is used for happy path (e.g. the lightning network payment was successful).

Timelock

Allows B to claim the funds from the smart contract once the timelock T expires. This is used for sad path (e.g. when the counterparty doesn't cooperate) and makes sure the funds are returned to the original sender.

Cooperative close

It is also possible to cooperatively close the contract together (but both A & B must agree on the closing terms of the contract).