Complete Guide on a Token Swap
The process of transferring tokens from one blockchain network to another (“migration of tokens” or “token swap”) is an essential part of a modern crypto world.
Token swap appeared as a term to describe the process by which the balance of tokens holders are transferred from their ETH wallets to new compatible one of a specific project. After replacement, tokens are effectively moved from one blockchain network to another.
Here are some pros of the process:
- Investor capital is not locked up.
- Users can exchange placeholder tokens on exchanges while the project develops its technology.
Millions or even billions of dollars are involved in each migration, so the stakes are high. But despite this, the blockchain industry remains mostly ignorant of the migration of tokens and their consequences.
Token Swap Features
Often, swaps are performed by projects that raise money by the crowdfunding method using the Ethereum blockchain to distribute tokens. The assets at this stage usually act as “substitution” for future tokens, which will eventually be used when the project is released.
How Does That Work?
For users and investors, their degree of participation in the token migration procedure varies – as a rule, depending on the place where they store their assets.
Storage of coins on exchanges:
- Users do not have to take any steps to take part in the swap.
- An exchange is responsible for all the technical requirements of the swap.
Storage of coins in wallets
- Users might have to initiate the process manually.
- Customers should proceed with the registration process to send their tokens from the previous blockchain to a new network.
In practice, this procedure usually entails creating a key for a specific platform (for example, a key in the EOS blockchain) and sending tokens to the key address where they were initially stored after the purchase before the network starts functioning (for instance, the Ethereum key).
Projects typically include timeframes during which users must change their tokens. In platforms such as EOS, these are strict deadlines, after which the tokens on the old blockchain will be “frozen” and unavailable to users.
Token Swap Examples
Binance Coin was the last one in this list that switched to its own Binance Chain network. As for now, several projects have already announced the transition from the Ethereum blockchain to Binance Chain.
Atomic Wallet is one of the examples of such. The wallet has its own AWC token, available on the Ethereum network, and it’s also issued on Binance blockchain. So, it is supposed to be a unique solution for both cases. Check out our step-by-step guide on how to swap your AWC tokens.
Are There Any Disadvantages?
The risks remain despite the attempts of the exchanges to simplify token-swaps.
Dialogue with the community is one of the ways that can mitigate a common issue: lack of awareness among token owners, which is, perhaps, one of the most significant risks.
Token-swaps are not “defenseless” processes: users should trust those who are responsible for the project to implement the transfer of assets following the plan.
However, since the migration of tokens is a relatively new phenomenon, a plan for their implementation often does not exist.