Introduction
The crypto industry’s huge growth is partly dependent on innovation. Cryptocurrency has changed the economy in a variety of ways, all while promoting simplicity and profit. Customer satisfaction has increased as a result of the streamlined procedures for maintaining, accessing, storing, and acquiring digital assets, which have reduced various complications that preceded the burgeoning industry.
The market is always growing, and a new token is introduced to the mix whenever a corporation feels ambitious. Each of these tokens represents a possible investment opportunity as well as fresh value. To some investors, this might have a significant impact on their financial futures, thus learning how to swap properly is critical.
New traders are sometimes puzzled when confronted with an excessive amount of crypto tokens. They may have obtained a few tokens from one chain but perceive a chance to benefit from another one. Many individuals still use the conventional technique of converting in this situation. They would exchange the crypto assets for fiat cash, which they would then use to purchase the coin they wanted. While this method still works, it requires an additional step and you may have to pay transaction fees many times.
Token swapping is a smooth process that allows you to instantaneously obtain the coin you desire. It was created to lower the cost of overhead and the time it takes to exchange one crypto asset for another. Let’s dive in deep.
What are token swaps?
The transfer of digital tokens from one blockchain to another is known as a token swap. It commonly happens when a project raises funding on one blockchain and then migrates its tokens to a different proprietary blockchain after releasing the project’s main net.
Blockchain projects, on the other hand, may move to other blockchain networks for a variety of reasons. As a result, the development team must make it possible for investors and users to exchange the project’s native token for one that is compatible with the new blockchain network. The procedure is referred to as token swap or token migration.
The token swap process is usually managed using a Hashed Time lock Contract (HTLC) deployed on the blockchain. Multiple HTLCs are used to swap tokens in payment channels and across blockchains with the help of an application-layer integrator.
Token swaps are used for the immediate exchange of one cryptocurrency for another without the need for a crypto-to-fiat exchange. Investors may already find a variety of exchange services on the market that allow them to buy and sell cryptos for traditional currencies or digital assets.
However, customers are more likely to trade directly between two crypto assets due to lower liquidity and fewer trading pairings on multiple exchanges. Trading off less popular cryptos may not be as beneficial in this instance, since they are unable to reach full functioning owing to their restricted availability on exchanges.
How do you swap tokens?
Depending on the crypto pairs you want to exchange and the manner of the switch, the token swap procedure varies somewhat. However, whether you use an exchange to trade tokens or do it yourself, there are a few things to keep in mind.
To begin, it’s important to remember that when you let an exchange handle tokens swap for you, trading the current token is normally paused in order to avoid interfering with other deals.
Furthermore, the coins that are utilized for currency generation and distribution for airdrops or prizes are usually paused. Thus, the time before a swap is just as crucial as the actual time of swap since exchanges have to prepare for certain things in advance.
A token swap involves exchanging one cryptocurrency for another at a predetermined rate. A token swap, unlike swapping tokens for purchases, is the exchange of one coin for another, implying that investors would switch the old for the new before the old’s value depreciates.
A token exchange can be accomplished in a variety of ways:
Token Swap on an Exchange
Allowing an exchange to manage your token swap is one of the most popular methods of doing so. The old tokens are retained in the wallet, and following the exchange, the swapped tokens are sent to a new wallet.
The wallet containing the previous tokens is deleted after the switch is complete. Following the start of trading on the new token, you can either withdraw or trade them, according to your preferences. In general, an exchange is a better alternative than manually switching tokens because there are no hidden costs and everything is open and visible.
Swapping the Token Yourself
The procedure for dealing with the exchange on your own is largely the same. You will be given a wallet to download or an online site to register with by the platform/person who issued the currency you are holding. You’ll get two wallets in both cases: one for the old coin and one for the new. The old token will then need to be sent to a specified address. After that, the new account’s wallet will be credited. The manual procedure, on the other hand, carries a higher risk.
Wallets and websites built by token issuers are primarily designed for the purpose of trading tokens, therefore it may be unfamiliar territory for people unfamiliar with token swaps. Furthermore, the procedure may or may not function as intended, so any errors you make will be permanent and irrevocable. As a result, manual swaps are best suited for people with prior bitcoin knowledge.
On a side note, the process outlined below is a general outline of the manual swap and may differ depending on the token pairings and other variables.
Token swap with Whalesheaven
Consider trading tokens with Whalesheaven if you want to swap tokens with the simplicity of an exchange platform while also having the flexibility of swapping the crypto yourself.
Whalesheaven was created to provide a safe haven for low and large volume traders to exchange their tokens for other cryptocurrencies. Other centralized or decentralized exchanges may not provide all of the functionality that a regular user, particularly a crypto whale, desires.
Whalesheaven does not force its customers to go through a lengthy KYC process, allowing them to maintain their anonymity. We offer a minimal transaction charge and no withdrawal or gas fees, which sets us apart from the competition.
Our exchange offers a responsive customer service team that is available at all times to assist clients. The team will work to resolve any issues that arise and will listen to user feedback.
Benefits of token swaps
Token swaps provide a simple way to trade cryptocurrency. Platforms that provide token swapping capabilities serve as a simple, versatile, and secure crypto-to-crypto trading gateway. These systems allow users to transfer data between custodial and non-custodial wallets. Additionally, because the token swap process and related transactions are kept on the chain, users may benefit from data integrity.
Aside from that, atomic swaps ensure the atomicity of the token transfer. With cross-chain token swapping, users may also find greater scopes for interoperability. Most crucially, the benefits of token swap smart contracts might eliminate third-party token costs, allowing for payment via tight escrow. As a consequence, token swapping can help investors save money while trading cryptocurrency.
What are the risks?
The phenomenal rise in popularity of token exchanging services places the spotlight squarely on their valuable benefits. However, before choosing a switching service, it is critical to conduct a due investigation. When looking for a token swap platform, consider the availability of various crypto pairings, the speed with which currencies may be swapped, and the platform’s security architecture.
High speed also eliminates the chance of slippage, protecting users from price volatility. Fixed exchange rates are available from certain token switching platforms, however, they come with higher transaction costs. As a result, it’s also necessary to be aware of the significant dangers connected with token swaps.
One of the foremost drawbacks of token swap refers to the public visibility of token swaps, thereby reducing privacy.
In certain circumstances, token swap smart contract functionality implies a lack of flexibility. The tokens may be transferred back to the payer or locked in if a designated party does not remove the tokens within a set time period by submitting an off-chain secret. So, either you have a transaction or you don’t.
While cost is one of the most important benefits of token exchanges, it may also be a significant disadvantage. An additional expense may be incurred as a result of the exchange rate. If a public blockchain is used, the cost of establishing and utilizing the token swap smart contract will be increased.
Bottom line
Token swaps may appear hard, but they are simple to execute if you have the necessary information and resources. It is a personal choice whether to use an exchange or to swap the token yourself.
Many individuals prefer to perform the exchanges themselves for ideological reasons since they do not want to rely on third parties. On the other side, some consumers are comfortable entrusting their token trades to exchanges.
However, getting the precise swap pair that you want is not always attainable. In any event, token swaps do not necessitate any specialized understanding and may be completed by anybody. You should be able to handle it properly if you carefully follow the instructions and stick to the deadlines.
Whalesheaven checks all the boxes for crypto investors looking for high-security crypto exchanges with a peer-to-peer element; our exchange is here to help.