A token swap is not just a change in the name of a trading operation, since the replacement of a token directly affects the operation of the cryptocurrency blockchain, and coin holders must perform certain actions. For example, if an investor keeps his tokens on the exchange, then the trading platform itself can perform all exchange procedures for the client.
The exchange of tokens as a mechanism for transferring cryptocurrency from one blockchain to another has its key characteristics:
- transaction speed is predetermined;
- a proportional ratio of new and old coins is established;
- the terms of the exchange are clearly indicated;
- as a result of the swap, the old tokens become invalid.
- Such migration leads to the fact that there is a transfer of investment capital to another network.
With the help of blockchain technology and the use of tokens, companies can provide their services using their own coins. However, developing your own network is a costly process and often causes a lock-in problem where a business wants to issue its own tokens to fund the development of a blockchain, but issuing coins requires the creation of a separate blockchain. One of the effective solutions to the problem is to develop tokens on the existing blockchain. In this case, you will be able to issue coins to raise funds for the development of a crypto project and at the same time create your own network.
When your own blockchain is ready, you need to transfer tokens that work on someone else's blockchain to it. In this case, they resort to the token swap procedure, which is characterized by certain advantages for each category of participants in the crypto community:
The opportunity to establish themselves and gain a credibility among investors and community members, as well as provide planned services at the start, thereby contributing to the growth of capitalization and the price of a coin when it is listed on a crypto exchange;
The ability to launch your own token on someone else's blockchain, when there are not enough funds to create your own, and in the future, the transfer of coins to your own network (the situation described above);
You can not be afraid of a temporary freezing of assets, since tokens are characterized by a high liquidity rate and this allows you to earn money from coins even before the full launch of a crypto project.