Swaps in the world of cryptocurrencies: what are they and why are they needed?
In this article we will look at why a token swap is needed, what advantages and risks it carries.
There are two types of swaps: CEX exchange and atomic swap.
To gain access to swaps on the exchange, you must undergo full account verification. The exchange acts as an intermediary, which can protect against fraudsters, but during the swap the coins are kept by the exchange itself.
More interesting is atomic swap - completely anonymous and without intermediaries, it works on smart contracts with HLTC.
HLTC is a hashed time lock that locks coins during a transaction to ensure the security of the transaction.
There are different types of atomic swaps:
* cross-chain bridges move assets of different standards between networks;
* cryptocurrency exchangers operate without smart contracts, so they are more convenient, but much more dangerous, and the exchange rate is unfavorable;
* wrapped tokens are needed to move the same asset to another network.
What is needed for a token swap?
1. Create a wallet and top it up with tokens.
2. Connect your wallet to DEX.
3. Select the trading pair to exchange and the number of tokens you want to exchange.
4. Confirm the exchange (sign the transaction).
Why are swaps needed?
Swaps are the basis that you cannot do without. They allow us not to be limited to one blockchain or project and make a profit from converting coins.
Additionally, swaps can be useful:
To profit from volatility.
If you choose the right moment and platform, you can make money by exchanging coins.
To reduce risks.
The more different coins you have in your portfolio, the lower the risk of loss due to volatility. You can also put coins for staking or farming and earn passively. This also requires swaps.
Risks of swaps
Personal information, passwords and seed-phrase are safe. Attackers can steal coins only through phishing attacks. The only vulnerability of atomic swaps is the human factor.
The safety rules here are very simple: attentiveness and caution. Do not follow suspicious links, open emails, or register on exchanges that make you suspicious. Then your tokens will be safe.
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