In cryptocurrencies, swapping refers to the exchange of one coin or token for another. Sounds easy, but with over 1,500 types of cryptography, the situation can be a bit clunky.
The market is constantly growing and new tokens are added to the mix each time a company feels ambitious. Each of these tokens represents not only new value, but also potential investment projects. For some investors, this can shape their economic path, so knowing how to trade effectively makes a difference to the world.
Faced with an overwhelming collection of coins, new traders often don’t know how to proceed. You may have picked up some tokens from one chain, but you have the opportunity to use another. Here, many follow traditional conversion methods. They convert cryptocurrencies into fiat currencies and use them to buy the coins they need.
This still works, but it requires additional steps and you may have to pay transaction fees multiple times. Cryptographic swapping is a more seamless process that allows you to get the coins you need instantly.
This article describes the basic concepts of swaps and the differences between swaps and trading.
Swapping vs Trading
The swapping and trading mechanisms are the same, but the difference in results is important.
When you trade crypto, it means that you perform the trade based on the order book. You can only trade based on the trading pairs available on a particular exchange.
Swapping is a similar process, but more flexible. You can exchange any cryptocurrency for another cryptocurrency, even if the pair is not active in the spot market. This eliminates the need to pay transaction fees multiple times. In most cases, convenience is a priority here when the amount of replacement is small. However, the concept of this applies to all volumes.
Despite the subtle differences, trade and barter are incompatible. This is not a syntax issue, but a value issue. It’s a bit annoying, but there are good reasons to trade rather than barter.
It is a better solution as quick solution. In most cases, it has nothing to do with profit. If DAI needs to accept but wants to buy something that uses only ETH, now is the right time to trade.
In addition, the swap feature allows users to exchange fiat and cryptocurrencies without the need for trading knowledge.
Swapping on CEX vs DEX
It is popular on major platforms and is now established as a selling point for small exchanges. This process is already superfast in nature, so competitive factors arise from diversity and transaction fees.
There are advantages to using both centralized and decentralized exchanges, but the former offers what DEX couldn’t, and it’s reassuring. That doesn’t mean you’ll always lose money with DEX, but lack of regulation tends to drive people to their toes.
Availability plays an important role in deciding whether to use DEX or centralized exchange.
First, note that there are currently over 6,000 different tokens and counts. For all blockchain projects and business ventures, brand-new tokens will often be on the market. Not all of them reach a crypto exchange, but they are easy to find in DEX.
Let’s also take a look at Metaverse and NFT.
Metaverse is known as a large producer of tokens, some of which will eventually become NFTs. Cryptographic games are becoming more and more popular, and each title has its own token. Depending on what you’re playing, some in-game assets are worth a lot of money. For example, Axie Infinity has tens of thousands of dollars worth of NFTs. It is a convenient and smooth experience when investing in any of these.
A common problem with DEX is that anyone can create tokens with AMM. Unquestioned traders can fall into financial despair. As you can see, there are drawbacks to being too available. Reliable exchanges may have few options for exchangeable pairs, but they are official and often quality monitored. We use the term “short” fairly loosely here. This is because most platforms have hundreds, if not thousands, of ciphers available.
Another factor is transaction fees or gas fees when dealing with DEX. When switching to DEX, users often face high gas charges. You can mitigate these costs by using a centralized platform.
What’s more, there are always bonuses and rewards that can be charged on official exchanges. With just a few moments, swap costs can be further reduced or eliminated altogether. Some companies can also trade cross-chain assets at much lower fees. This does not happen on decentralized exchanges.
Now that you understand how swapping works, your decision-making is a little more sophisticated. Remember that crypto trading has no fixed strategy. The market is always volatile, so the best approach is to stay open and keep an eye out for opportunities.
Trading provides flexibility and allows us to quickly reach where we want in the flow of things. Whether you use a centralized platform or a decentralized exchange, it’s helpful to keep in mind that the value of cryptography is constantly changing. Trading is convenient, but it’s not about profits. What you want today may not be what you need tomorrow.