Swap (Crypto)
An exchange of one cryptocurrency for another, either on a centralized exchange or via a decentralized protocol.
What Is a Swap in Crypto?
The process of exchanging one cryptocurrency for another, usually done on a decentralized exchange (DEX) without needing a centralized intermediary. This is often done through a smart contract, allowing users to instantly swap assets like Bitcoin for Ethereum, or vice versa, directly from their wallets.
How It Works
- You specify the crypto asset you want to swap and the one you want in return.
- The transaction happens automatically through a smart contract, ensuring the exchange happens at a fair rate (often using liquidity pools).
- Swapping is usually fast and doesn’t require a traditional order book like centralized exchanges.
Example
- Suppose you hold Bitcoin (BTC) but want to trade it for Ethereum (ETH). You can go to a decentralized exchange (DEX), select BTC for ETH, and the swap is done automatically via a smart contract, transferring the Ethereum directly to your wallet.
Why It Matters
- Swaps are a key feature of decentralized finance (DeFi), enabling users to trade cryptocurrencies easily and without relying on centralized platforms or exchanges.
- They provide flexibility, allowing crypto holders to diversify their portfolios quickly.
In short, a crypto swap lets you trade one cryptocurrency for another directly, without needing a middleman or a lengthy process.