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Token Swap

Within the cryptosphere, a token swap has two distinct definitions. The first refers to the process of instantly exchanging one cryptocurrency for another without first completing a crypto-to-fiat transaction.

What is a Token Swap?

The second definition of token swap, on the other hand, refers to the transfer of projects or platforms from one blockchain to another, as well as the currency swapping procedures that frequently accompany such a transition.

In this situation, a project has elected to migrate its operation base to another blockchain with distinct token requirements for one reason or another. As a result, the development team must make it possible for investors and users to exchange the project's native token for one that is compatible with the new blockchain network. The procedure is referred to as token switching or token migration.

Why are Token Swaps important?

The degree to which users and investors are involved in the token transfer process varies, usually depending on where they keep their tokens.

Those that keep their tokens on exchanges are unlikely to be required to take any action in order to participate in the migration. Binance, for example, claims to fulfill "all technological needs" of the EOS, Tron, ICON, and Ontology migration processes.

Exchange centered in San Francisco Kraken also seeks to make the procedure less difficult.

"Ahead of the changeover, we suspend financing, switch all the old currencies for new, and when we resume funding, all the old balances are for the new coins," Kraken co-founder and CEO Jesse Powell revealed. "That's all there is to it."

Users who save their tokens in wallets, on the other hand, may have to start the procedure manually.

What is unique about Token Swaps?

In comparison to the traditional issuing of shares, blockchains and tokens allow businesses to accept investments and provide them with a variety of alternatives and control. However, investment is required to construct the backbone of blockchain, referred to as a "mainnet." This creates a paradoxical situation in which the blockchain, in order to generate tokens, demands investment (as an investment option).

Creating a token on an existing blockchain is a good approach for this. Smart contract capability on some blockchains can be used to establish a second layer on their native coin. As a result, corporations can have their tokens on other blockchains while also developing their own. Ethereum and ERC-20 tokens are two well-known blockchains for producing bespoke tokens. In reality, after its introduction in November 2017, the ERC-20 standard triggered an avalanche of new coins.

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