A token swap, also acknowledged as a token voyage, is the alteration of digital tokens from one blockchain onto another blockchain. This transpires fundamentally when projects utilize one blockchain to foster funds, such as the Ethereum network, and then desire to transport their tokens onto their private exclusive blockchain once the project’s mainnet has been ejected.
On the other hand, an Atomic Swap is a peer-to-peer swap between various cryptocurrencies without an agent. The term “atomic” is a sumptuous computer science word suggesting they either occur exclusively or not at all.
Explain a Token Swap like I’m Five
In the dynamic world, fiat money experience ‘swaps’ or ‘interchange’ when administrators inject new denominations, issue a new variant of a banknote or censure (cease manufacturing or maintaining) a particular denomination.
In the crypto world, ‘swaps’ or ‘interchange’ commonly involved in a wider technical taste. Some blockchain projects mesh in token immigration if they need to shift onto a modified blockchain system. For example, the Storj system moved from the Bitcoin blockchain onto the Ethereum system in the year 2017 when the Storj’s coders noticed that the Ethereum blockchain gave high-grade scalability for their project. It is not feasible to simply replace one digital asset for another without adding new code, structures, or maintenance formations to make so.
How Does a Token Swap Work?
The formulation of blockchains and tokens have provided organizations the capacity to bring in investment or exchange co-operation through a token of their private scheme, providing them many more possibilities and more authority than conventional systems of distributing shares.
A token swap is a method by which one cryptocurrency is switched for another at a decided rate. Unlike trading one coin to purchase another, a token swap is the interchange of one coin for another, so it signifies that users are expected to switch the old coin for the new one, or the value will be lost.
For users and investors, the level of their engagement in the token immigration method diversifies – typically according to where they deposit their tokens. For people who save their tokens on exchanges, it is inconceivable that they will have to exercise any measures to join the voyage.
Example of a Token Swap
EOS and Tron are two unique examples of a token swap. EOS and Tron both were operating on Ethereum and both were following Ethereum’s ERC20 token standard. Investors on both systems could obtain ERC20 EOS and TRX tokens to procure a portion of revenue or apply either token on the ETH network.
After a few days, both EOS and Tron attained their ends of transferring from Ethereum to their personal blockchain. At such time, both designs injected a ‘token swap’ – a method where investors could file their ERC20 tokens to swap into established ‘mainnet’ tokens.
Through the method, investors favorably switch their ERC2O-based EOS and TRX tokens at a rate of one-to-one – indicating that the recently built ‘mainnet’ tokens experienced full control on each of their particular blockchain systems, and preserved their exchange value.
Token swaps are normally established through a method of recording and auditing or are promoted through a cryptocurrency exchange.
Case1: In this case, token owners are asked to manifest their token through a blockchain project’s coders, who then approve such tokens through a backed wallet. Following a token swap period, primary tokens are destroyed, while established assets then substitute them and are deposited in the individual wallet.
Case2: In this case, token owners are asked to deposit their stocks on a cryptocurrency exchange. At the time of a token swap, exchanges will terminate giving trading alternatives for that section and will inspect, approve, and exchange detested assets for newer ones.
Risk of a Token Swap
The principal risk of a token swap is juggling the deadline. Seldom there are courses given to support people who bungled the swap time. Finally, after a particular duration, there will reach a time when the old coin will be censured completely, and it becomes useless. Exchanges will remove the old token, wallets will cease maintaining it, and assistance and dapps linked with that token will no longer acknowledge it.
Often, a token swap is a sound idea, as it indicates that the token starting a swap has reached their purposes adequately to assure operation. So, while it may need attention, it should be noted as a symbol of the increasing potential for the investment.
Disclaimer: This information should not be interpreted as an endorsement of any cryptocurrency. It is not a recommendation to trade. The crypto market is full of surprises and overhyped assets. Do your research before buying anything. Do not invest more than you can afford to lose.