Crypto Terms: Letter T
Jul 07, 2023 |
updated: Apr 02, 2024
Token Swap Meaning:
Token Swap - a direct exchange of tokens between users or the migration of tokens from one blockchain to another.
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Let's find out Token Swap meaning, definition in crypto, what is Token Swap, and all other detailed facts.
A token swap refers to two things – the direct exchange of tokens between users and the migration of tokens from one blockchain to another.
The Direct Exchange
On the market, there are numerous exchange services that allow users to purchase and sell cryptocurrencies for fiat money or other cryptocurrencies.
Users who want to trade directly between two crypto tokens are sometimes unable to do so due to the limited liquidity and number of trading pairs available on each exchange. They are obliged to include the intermediary step of changing into and out of fiat money or one of the more popular cryptocurrencies (such as Bitcoin or Ethereum) rather than making a direct trade.
Though some exchange services actively address this problem by combining multiple other exchanges and obtaining liquidity from them. Thus, traders are able to directly swap between two digital currencies without the hassle and double fees that come with completing a trade in two steps. ShapeShift, AirSwap, and MetaMask are a few of the services that allow token swaps.
The Migration
Users of cryptocurrencies, such as ETH, QTUM, and NEO can create new crypto tokens on top of their blockchains. These second-layer tokens can use the security and popularity of underlying platforms without having to invest time and money into building their own ecosystem from scratch.
However, in some situations, the platform on which a coin is developed might become insufficient for its current requirements. For instance, a developer might decide to design a token on Ethereum's blockchain to take advantage of its vast user base. Though he/she might later realize that different fundamental characteristics are needed for the actual launch of the product.In this scenario, a developer could do a token swap, in which he/she would move the token from one blockchain to another while keeping all address balances.
