Crypto coin swapping

What is crypto swapping?

There are many interesting and strange things in the world of cryptocurrency. For example, swapping. Despite the unusual word, it is the exchange of one coin or token for another, which should be very simple. But there are over 7000 tokens, which makes it all not as easy as it might seem at first glance.

Web3 is constantly evolving and expanding. And with it comes the number of new companies that have started issuing their tokens. That makes it very important for those interested in investing to know how and where to make exchanges.

For example, you may have tokens of one chain. Then there is a profitable opportunity to profit from them in another chain. What’s next? Usually, in this case, it follows the usual way of converting into fiat currency and then buying needed coins. This is quite a working option, but it requires a series of actions and often a commission for each transaction (and there can be several of them).

Cryptocurrency exchanges are faster and easier. This option is available on most major deals, which makes trading even more convenient.

For example, you go to get Bitcoin instead of your Ethereum. You can exchange one cryptocurrency for about the same value through services and swap providers.

Swap also refers to migrating different projects and platforms from one blockchain to another. Such actions can often require a coin swap. In this case, the creators must give investors and users the means to exchange the token of the current project for another that will be compatible with the new blockchain network. This is called swapping or token migration.

Why are crypto swaps so popular?

Lately, the pioneer bitcoin is receding into the background, and cryptocurrencies with less market capital are coming to the fore. More and more people are learning about other digital assets, their capabilities, and their value.

However, many of the solutions are complicated and confusing, which scares away newcomers. They are especially afraid of losing money by making a mistake.

Therefore, it is important first to find a platform that you can trust and on which you can exchange a large number of different cryptocurrencies. The best swap platforms are easy enough to determine: by the number of users and their reviews. They also add new cryptocurrencies that are in demand. Handy platforms also try to be easy for those more used to fiat currencies.

It’s also important to have all of the following together, so you don’t have to constantly move cryptocurrency between platforms, exchange for exchange, and wallet for storage.

Swapping vs. trading

Swapping and trading, at first glance, are very similar. But if you dig deeper, they are not. When you trade cryptocurrency, the trade is based on an order book. And transactions are only possible with those trading pairs available on a particular exchange.

With swapping, you can exchange one cryptocurrency for another, even if that pair is not available on the spot market (the open financial market, where the processes of buying and selling assets occur in a short time). You don’t have to pay multiple transaction fees.

Although it seems that swapping is more profitable in this case, there are many cases where it is better and more convenient to trade. For example, when you need to quickly exchange one cryptocurrency for another to make a purchase, there is no question of making a profit.

Swapping also allows exchanging of fiat and cryptocurrencies, even if the user does not know about trading.

Swapping on CEX vs. DEX

Cryptocurrency exchanges have become popular on large platforms, even on small exchanges. The main reasons are the large variety and transaction fees.

There are advantages to using both centralized (CEX) and decentralized exchanges (DEX). And many people are simply afraid of DEX, feeling their finances are more secure with CEX. Here, for example, are the arguments of one such person. Everyone wants a certain amount of certainty, especially when it comes to money. And DEX’s lack of regulation tends to make people wary. But DEX has a major trump card: affordability. All new tokens and cryptocurrencies are easy to find exactly on DEX.

But users of decentralized exchanges often face high exchange fees. They can be reduced by using a centralized platform. In addition, the official exchanges always have various rewards or bonuses. Some companies allow you to exchange interchain assets cheaper. This does not happen on decentralized exchanges.

How to swap cryptocurrencies

As we wrote earlier, a swap is a seamless exchange of one cryptocurrency for another. This makes it easy to access tokens that have just appeared or have a low market capitalization.

All you have to do is enter the amount you want to exchange and the desired trading pair. The transaction will then be instantly processed and the coins converted. Thus, there will only be one commission.

Various platforms offer a convenient and secure gateway between cryptocurrencies. Exchange is possible both from a custodial (Custodial services work similarly to custodians: they store customer funds and private information on the server side.) and from a non-custodial wallet (A non-custodial cryptocurrency wallet retains full control of its funds for the address creator, as it does not transfer their private keys to anyone.) Sometimes you may not need to transfer your coins to a cryptocurrency exchange service or exchange. Often, wallet creators include a cryptocurrency exchange service in their wallets.

The most famous services specializing in cryptocurrency swaps are Simpleswap, Changelly, ChangeNow, and Shapeshift. But most services and wallets also support this service.

And pay attention to the exchange rate. The higher it is, the lower the possibility of slippage. It implies that the amount of the desired cryptocurrency in exchange for another may decrease by the time the transaction is completed.

Therefore, several services operate without slippage and offer a fixed swap rate that does not change until the transaction is completed. However, it is worth paying attention to the fact that the commission may be higher.

For beginners, the three most common methods of exchanging cryptocurrencies are best suited: over-the-counter (OTC), centralized and decentralized exchanges. Let’s explore them.

Centralized exchanges

With the growing number and popularity of cryptocurrencies, centralized exchanges have become numerous. On some of them, it is possible to make an exchange at a very low price or for free.

However, such exchanges have traders as their main audience, which makes the platforms adjust to them. And this can make it difficult for ordinary people to be involved.

With the growing number and popularity of cryptocurrencies, centralized exchanges have become numerous. On some of them, it is possible to make an exchange at a very low price or for free.

• These exchanges have traders as their main audience, which makes the platforms adjust to them. And this can make it difficult for ordinary people to be involved.
• Centralized exchanges can have a complicated interface. A beginner may be intimidated by many indicators, charts, and other elements.
• To make a simple cryptocurrency exchange, one must pay every step of the way, from deposit to withdrawal.  
• Complicated KYC (customer identity verification) procedure. Verification can take days and months.
• The volatility of cryptocurrencies can lead to the fact that your order can be rejected due to price fluctuations, and you will have to do everything all over again.
• Some platforms may not work in your country of residence or region.

Decentralized exchanges

They were invented as an alternative to CEX and have surpassed them in many ways.

• There is no need for verification because only one user is involved. The exchange is available anywhere in the world.
• DEX has low liquidity due to low popularity. Therefore, it may not be easy to exchange a large amount.
• Not many digital assets are available on such exchanges or are not well known.

OTCs

OTC exchanges (OTC for short) may be the best solution for unsophisticated users. Usually, they work with centralized exchanges via API and have simple and clear menus.

They are quite opaque, so until the end of the exchange, the user may not know the final rate and be cheated.

OTCs have their fees for each transaction. The exchange rate, in the end, will be less favorable than on CEX.

Top tips for swapping cryptocurrencies

• Don’t forget the Ethereum gas fee. This applies to all tokens created on ERC20 using smart contracts. They are processed through the Ethereum network, so a gas fee is charged.
• Take into account the exchange fee as well. Before making a transaction, familiarize yourself with the fees charged by a particular platform or service.
• Check the cryptocurrency you receive. Some platforms show the dollar equivalent of the desired token, which may be lower than expected.
• Before sending the cryptocurrency received after the exchange to your wallet, check if it supports it.
• Don’t forget about liquidity and slippage.
• Be aware of swap rate changes, which depend on the cryptocurrencies available.
• If possible, use two-factor authentication (2FA), don’t share your private keys with anyone, and don’t use them on the site itself.
• Use only known and trusted exchanges.