The crypto industry leans towards innovating simple and seamless processes for handling, storing, purchasing, and using digital assets. This prevailing theme has directly improved the user experience and removed some of the complexities once attributed to the emerging sector. One such groundbreaking advancement came in the form of token swaps, designed to reduce the overall costs and time required to exchange one crypto asset for another.
However, as impressive as it sounds, not many seem to understand the importance of such functionalities. In this guide, we will take a look at how token exchanges work and how they fit into the industry as a whole.
What are token swaps?
A token swap has two distinct definitions within the cryptosphere. The former connotes the process of instantly exchanging one cryptocurrency for another without having to perform a crypto-to-fiat exchange first. This definition summarizes the workings of prominent platforms like Changelly , Shapeshift, and Airswap .
On the other hand, the second definition of token swapping revolves around the migration of projects or platforms from one blockchain to another and the coin swapping requirements that often accompany such a move. In this case, a project, for one reason or another, has chosen to change its base of operations to another blockchain with unique token standards. As such, the development team must provide the means for investors and users to exchange the project's native token for another token that is compatible with the new blockchain network. The process involved is what we call a token swap platform development or token migration.
How do token swaps work?
For this guide, we will focus on the first token swap definition. As mentioned above, this involves the use of seamless crypto-to-crypto exchange services rather than the often inefficient and time-consuming approach of converting a digital asset into fiat before subsequently using the fiat to purchase the desired currency. In most cases, this solution provides an easier gateway to cryptocurrencies with low market capitalization.
For example, if you want to trade your COMP coin to ZIL , you will most likely find that exchanges that provide the COMP/ZIL trading pair are few and far between. As such, you may first need to exchange your tokens for $CCSCEX fiat currencies or other established currencies such as BTC , ETH , and USDT . From there, you can exchange fiat or popular currencies directly to ZIL.
You will agree that this process is long and profitable. To execute such a trade, you would have to pay transaction fees at least more than once. Furthermore, it is impossible to assess how price volatility may affect the profitability of trading. Remember that crypto asset prices are often volatile. Therefore, the approach mentioned above could make it difficult to achieve the desired price entry.
In light of these drawbacks, exchanges, wallets, and other platforms began to enable instant trading functionalities. With this, users can exchange one crypto asset for another directly. All you need to do is enter the amount you wish to exchange and your desired trading pair and the token migration platform development services will instantly process and convert your currency. With this form of transaction, you only have to pay transaction fees once.
Token-swapping platforms offer a convenient and secure crypto-to-crypto gateway: you can do all the trading you want from a custodial or non-custodial wallet. Depending on the strength of your wallet, you may not need to transfer your coins to a crypto exchange or exchange service before accessing an instant crypto-to-crypto exchange feature. Wallet providers often embed crypto exchange services so that users can safely convert their coins from their personal wallets.
Essentially, what these crypto exchange services bring to the table is simplicity, speed, affordability, and security. Some even go so far as to allow users to purchase cryptocurrencies with credit or debit cards.
Examples of solutions that offer dedicated crypto exchange services are Changelly , Shapeshift, Change Now, and Simple swap. Exchanges and wallets have also started to create their internal exchange services. Furthermore, the DeFi craze of 2020 further stimulated the emergence of DeFi token trading solutions. The same trend is currently spreading through the NFT market . When it comes to token swap platform development, the options are practically limitless.
Due to the explosion of exchange services, it has become increasingly important to carry out due diligence before choosing one. Things to keep in mind include the availability of a wide range of crypto pairs, the security prowess of the platform, and the speed at which coins are traded. Note that high speed negates the possibility of skidding. Slippage occurs when the amount of cryptocurrency A you receive in exchange for another cryptocurrency B decreases sharply before the transaction is complete.
It is worth mentioning that some services eliminate slippage by offering fixed swap rates that are maintained from the start of the transaction until its completion. The only additional requirement of such offers is that you may have to pay a higher transaction fee.
What does the future hold for token exchange services?
While Bitcoin remains the go-to crypto asset for many new investors, it is their foray into the altcoin market that ultimately exposes them to the myriad of opportunities built into the digital asset space. This is where token exchange services come into play. They double down on the user experience and put mechanisms in place to unlock the altcoin market for users who lack the technical expertise required to navigate crypto exchanges.
As the crypto industry continues to gravitate towards mainstream adoption, token trading services are expected to become more prominent. However, this expectation puts additional pressure on service providers to improve their offerings. The onus is on them to increase security, increase sharing speed, and offer more user-centric features.
Conclution
Token exchange services are playing a critical role in the current cryptocurrency renaissance. They remove common barriers to entering the altcoin market. In some cases, these solutions provide an easier gateway to cryptocurrencies with low market capitalization. Judging by its simple, fast and less complicated approach to exchanging digital assets, there is every reason to believe that token swap platform development will continue to feature prominently in the crypto industry and coming soon in Venezuela EXCHANGE token $CCSCEX.
