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What is token swap in simple words?

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A swap is the exchange of digital assets between two counterparties or the transfer of coins from one blockchain to another. The rules of the swap exchange are pre-determined and known to all participants in the transaction.

At the time of writing, there are more than 23,000 different digital assets, according to CoinMarketCap. However, not all tokens are represented on centralized exchanges (CEX). Most of them are traded exclusively on decentralized platforms (DEX). The latter exclude third parties from the process.

To swap tokens you need to:
  • Create a cryptocurrency wallet and add coins there.
  • Connect your public address to DEX.
  • Select a trading pair for the swap and specify the amount of cryptocurrency to be exchanged.
  • Sign the transaction.

Cryptocurrency exchange can be called a basic skill for working and using digital assets. Thanks to token conversion, the user is not limited to one blockchain or project and can get some profit from the transfer.

The high volatility of cryptocurrencies is both a disadvantage and an advantage. A trader can make a good profit on a transaction, but he needs to choose a good moment to enter a position and trade on proven platforms.

Also, token swap helps to reduce the risks of investing in cryptocurrencies. Keeping different coins in your account can keep your portfolio safe from strong price fluctuations in the market.
In addition, it is not at all necessary to keep cryptocurrencies "under lock and key". Many projects offer steaking programs, i.e. locking assets in a smart contract for a certain period of time. Swaps may also be required for such transactions.
 

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