What You Need to Know

Cryptocurrencies are digital assets that operate on decentralized computer networks known as blockchains. Each blockchain has its own rules, features, and native currency - like Bitcoin, Ethereum, or Litecoin. Users need these specific coins to use the respective blockchains, which can be obtained by buying, mining, or earning them. 

What if a user wants to switch blockchains or explore different projects and opportunities within the crypto space? Or maybe they’re ready to adjust their risk and move to another currency or token?  That’s where SWAP comes in.  

Crypto swapping is the process of exchanging one cryptocurrency for another directly, avoiding the need to buy or sell, which can lead to higher fees and slippage risk. Let’s review what crypto swapping is, how it differs from crypto trading, its benefits, and how CoinFlip can assist you with it. 

What is Crypto Swapping? 

Crypto swapping allows you to convert one cryptocurrency into another using a smart contract, decentralized application (DApp), or a trusted intermediary such as CoinFlip. Unlike crypto trading, which involves first selling one coin for fiat and then buying another coin with fiat, crypto swapping reduces the number of intermediaries and costs by allowing direct exchange between users or their wallets with minimal fees and delays. 

There are different types of crypto swapping, depending on the platforms and protocols used. Some of the most common ones are: 

• Atomic swaps: These are direct exchanges between two parties using a special smart contract called a hash time-locked contract (HTLC). This contract ensures both parties receive their coins simultaneously. Atomic swaps can be done across different blockchains if they use the same hashing algorithm and time-locking mechanism. 

• DEX swaps: These swaps use decentralized exchanges (DEXs) to match buyers and sellers of different coins. DEXs operate on blockchains, allowing users to trade directly without intermediaries or custody of funds. DEX swaps can be done within the same blockchain or across different blockchains, depending on the DEX and available liquidity. 

• Aggregator swaps: These swaps use aggregators to find the best rates and routes for exchanging different coins. Aggregators scan multiple DEXs and other liquidity sources to execute the swap on behalf of the user, with minimal slippage and gas fees. Aggregator swaps can be done on the same blockchain or across different blockchains, depending on the aggregator and the connectors used. 

CoinFlip Preferred offers a private client service for swaps, simplifying the process and enhancing privacy. With advisor assistance, we ensure an error-free experience while accessing the same deep liquidity that our clients enjoy for traditional transactions. 

How Does Crypto Swapping Differ from Crypto Trading? 

Crypto swapping and crypto trading are ways of exchanging cryptocurrencies, but their primary difference is the use of fiat money. Crypto trading usually involves selling one coin for using fiat money (like U.S. dollars or euros) and then buying another coin (with fiat) which adds complexity and costs. Conversely, crypto swapping operates solely in cryptocurrency, requiring only the coins you wish to exchange. This simplifies the process and reduces its costs. 

What are the Benefits of Crypto Swapping? 

Crypto swapping has several benefits for users: 

• Flexibility: Users can easily access and explore different crypto blockchains, projects, and opportunities, swapping their coins for any other coins supported by the respective platform, service, or protocol. 

• Security: Swaps reduce reliance on traditional exchanges, minimizing counterparty or market risk.  

• Efficiency: Users can swap their coins quickly with minimal gas fees, slippage and hassle, often getting better rates and faster transactions. 

What are the typical steps in a Swap? 

The type of Swap, the service you use, and the crypto assets being swapped will impact the process. At CoinFlip Preferred, we take a more guided approach to swaps. First, you’ll need to understand what crypto asset you’re swapping from and to. For example, let’s review swapping Bitcoin (BTC) to Ethereum (ETH).  

Step 1: Ensure you have both wallet addresses ready: one for your send (BTC wallet address) and your receive (ETH wallet address). You will be exchanging your Bitcoin for Ethereum. 

Step 2: Depending on the service, you will specify an amount and either receive a quote or be prompted to send Bitcoin (BTC) directly to the other party or designated Bitcoin (BTC) address for the smart contract.  

Step 3: At CoinFlip Preferred, we streamline the process by collecting the Ethereum (ETH) or other assets you wish to receive all on the same page. Below is an example of the CoinFlip form: 

Step 4: At this point, you will either receive an instant quote or be contacted to confirm the quote for the amount of Ethereum (ETH) you receive for the specified Bitcoin (BTC). These quotes are typically valid for a specified period, and if confirmed, they are locked for the same duration.  

Step 5: Confirm and send the Bitcoin (BTC) to the service provider’s (CoinFlip Preferred) Bitcoin (BTC) wallet address. This transaction is now recorded on the blockchain and can be tracked by you. 

Step 6: In this scenario, the service provider, CoinFlip Preferred, confirms receipt and transfers the designated amount of Ethereum (ETH) to your specified Ethereum (ETH) wallet address. It is critical to carefully double-check the wallet address several times. As we all know, transactions on the blockchain are immutable. This is a benefit of the blockchain, but it comes with great personal responsibility.  

Cryptocurrency swaps enable you to effortlessly and securely exchange one coin or token for another. If you have any questions, please don’t hesitate to contact our CoinFlip Preferred team!