Cancel, Refund, and Punish explained

Atomic Swaps offer a lot of security and privacy benefits, but they also come with some responsibilities. It is important to recognize that Atomic Swaps are trustless, but not risk-free. As long as you follow the rules of the protocol, you can be sure that you will not lose your funds.

If you want to learn more about technical details, you can read this paper: Atomic Swaps between Bitcoin and Monero, Philipp Hoenisch, Lucas Soriano del Pino (opens in a new tab) or read this blog post (opens in a new tab).

Cancel

If the Swap Provider has not been able to redeem the Bitcoin within 12 hours (144 Bitcoin blocks) from the start of the swap, the swap will be cancelled. This is done by either you or the Swap Provider publishing a special Bitcoin transaction called the Bitcoin Cancel Transaction. As soon as this transaction is included in the Bitcoin blockchain, the swap is locked in a state where only the Refund and Punish paths can be activated. The Happy Path path where you redeem the Monero is no longer possible.

Refund

As soon as the swap is cancelled, you can refund your Bitcoin. This is done by publishing the Bitcoin Refund Transaction on the Bitcoin blockchain. If this is done within 12 hours (144 Bitcoin blocks) from the inclusion of the Bitcoin Cancel Transaction, you will get your Bitcoin back. If you do not refund your Bitcoin within this time frame, the Swap Provider can punish you. This is a security measure to ensure that you do not cancel the swap and then refuse to refund your Bitcoin which would result in the Swap Provider losing their Monero.

Punish

If you do not refund your Bitcoin within 12 hours (144 Bitcoin blocks) from the inclusion of the Bitcoin Cancel Transaction, the Swap Provider will punish you. This will result in the Swap Provider taking your Bitcoin as a penalty for not refunding it in time. Even if this state is reached and the Swap Provider has punished you, there's still hope to redeem the Monero. The Swap Provider can choose to allow you to redeem the Monero by transmitting a secret key to you. This however is at the discretion of the Swap Provider and they are not obligated to do so.