Submarine Swaps
Submarine swaps allows us to convert on-chain to off-chain funds and vice versa. They are based on a specific type of Bitcoin smart contract called Hash Time Locked Contracts, HTLCs for short. HTLCs can be included in both, on-chain and off-chain, transactions. In fact, they can be used to chain payments and is the main construct that enables money transfer over the Lightning Network. HTLCs can also be leveraged between an on-chain sender and an off-chain receiver, and vice versa, and these are submarine swaps. The submarine swap smart contract is called a swap provider. It can be managed by a third party service, but fundamentally it is just a smart contract on the blockchain.
With this technique we can
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trustlessly pay a swap provider in one network to perform a payment onto the other network
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trustlessly pay a swap provider in one network to get coins onto the other network
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trustlessly pay a swap provider to rebalance our lightning channels
In the following tutorials we will build the swap smart contract with BitcoinJS and imagine the first use case, sending funds to the swap provider on one network so that he performs a payment to a merchant on the other network.
To learn more about submarine swaps and how it works you can read this great explanation from Muun wallet and this nice article from Boltz exchange. For technical information regarding the swap smart contract that we will use you have to read Alex Bosworth’s submarineswaps.org documentation.