Steemit Crypto Academy/S13W1 -Token Swap
A token swap is basically exchanging of one token type with another token type. Once a token swap happens then old tokens are replaced by the new tokens that have more advanced and different functionalities so it is just like trading of old things for new ones.
There could be different things due to which token swaps can occur.
- If there is a project that wants to upgrade its technology system and that project wants to create new set of tokens so that they may reflect the change that they have made so it could be the a reason.
When token swap occurs than swapping of oldens for new one mostly takes a specific process. The process may vary from project to project and may vary from one platform to another where the tokens are traded.Swapping process submitting of request ,sending of old tokens at specific address and use of swap platform.
Fate of tokens
If we talk about the possibilities of happening of anything to original token then original tokens might be useless and lose their value also because it is just like as you are upgrading your phone and your old one becomes outdated so in the same way when a project introduce more advanced the features in final token then it become more valuable and hence old tokens remain behind in this way.
There is not sad ending always for original tokens because there are some kisses also in which they actually converted into another tokens which are new ones and definitely the project have a process where a person can exchange his old tokens for receiving for getting new ones at a certain ratio. In this way a person can be a part of project and can get benefit from project in order to receive final tokens or new tokens.
Dependency of fate of original token
Fate of original tokens depends upon specific rules set by project and these rules like us know that what can happen further and how a person can participate in token swap so it is very important to keep in consideration about announcements so that a person may not mis out any deadline or opportunity.
In a very summarised way I want to say that fate of original tokens at the time of token swap depend upon the project that what is the decision of project and token's mind becomes useless or might get converted into more valuable ones in the form of new tokens at a certain ratio but it is always important to stay informed so that you may follow project instructions for smooth transition at the time of token swap.
Blockchain wants to provide a more secure safer and transparent way for transferring of effects or information in between different parties thats why blockchain performs exchanges. Transactions are recorded in the blogs at blockchain and these blocks are linked together in a chain. This is a decentralized nature of blockchains which gives surety of verification of transactions in a equal and accurate way.
If I talk about launches then blockchain can be a very significant in its role in terms of facilitation of token exchanges. In a launch a project is responsible for issuing tokens to different participants and contributors etc. These tokens could present many more things which includes utility or ownership within a platform or in a project respectively. With the use of blockchain all these tokens could be very safer and secure in their distribution and trade among all participants.
Operation of exchanging tokens in allowance could be very essential due to following reasons:
- During a launch, operation of exchanging token is important because it gives permission to participants to receive their tokens and start using them within a project ecosystem that's why it becomes very significant for projects to rely upon their tokens as a mean of having access to their products and features.
- During launch,operation of exchanging tokens is important because tokens exchange enables liquidity and market dynamics. It permits participants to trade their tokens,and marketplace is created by project at which value of tokens can be decided and determined by their supply and demand. It could give more attraction to users and investors towards the project which contributes to the success and growth of project.
During launches there are specific mechanisms for exchange of tokens which may vary. There are some projects that conduct initial coin offerings or in other words initial token offerings where tokens are directly sold to participants and there are some projects in which tokens are distributed through air drops, where to comes are given away for free to different individuals.
I am using Ethereum blockchain that is using token swap as Uniswap V3 which is an existing example.At Ethereum blockchain Uniswap is decentralized exchange protocol which allows users to swap ERC-20 tokens directly from their wallets without need of any intermediaries.Uniswap V3 is a very recent launch that introduce many new features to protocol.
On Uniswap V3 token swap may performed by following different steps so here is a working to perform token swap on Uniswap V3.
1. Liquidity Providers:
Users can provide liquidity by collecting an equal value of two different ERC-20 tokens into liquidity pool.At Ethereum blockchain these liquidity pools are just like small contracts and users may earn fees from trades that occur in pool by providing liquidity.
2. Concentrated Liquidity:
Concentrated liquidity is another concept that is introduced by Uniswap V3. Users that can provide liquidity can choose specific range of price where they think that liquidity would be concentrated and it would permit for more efficient use of capital and would reduce slippage for those that want trading.
3. Range Orders:
At Uniswap V3 traders can also place range orders rather than specifying token amount they provide price range that they want to trade so in this way triggers have more control over their trades and give them permission to take benefit from price movements within a specific range.
4. Automated Market Making:
An automated market making algorithm is utilized by Uniswap V3. Whenever a trade starts then there are small contracts which adjust token prices based upon there liquidity in pool. In this way trade may be executed at more fair prices and in more efficient way.
5. Gas Fees:
Token swap on Uniswap V3 needs gas fees just like any transactions at this blockchain which is Ethereum blockchain so this gas fees is paid in Ether and it is used for the compensation of network validators for transactions processing in more efficient way.
Yes I know very well that steem blockchain has also undergone a token swap. Transition of steem blockchain was to a new blockchain which is called HIVE. This token swap was due to result of a community-led initiative for creation of more decentralized platform.
Token swap process at steem blockchain to HIVE involved the steps that I am explaining below:
1. Fork:
Community starts a hard fork of steem blockchain which results in the creation of new chain called HIVE. This fork was driven by keeping in mind the following concerns which involves over centralization and governance at steem blockchain.
2. Snapshot:
Snapchat at steem blockchain was taken at a specific block height. The snapshot that was at that time plays a significant role in capturing the ownership of steem tokens held by users at that time.
3. Airdrop:
After the occurrence of snapshot, when HIVE blockchain was launched then air drop of HIVE tokens was distributed to holders of steem tokens. When we talk about ratio of air drop then it was determined and based on amount of steem tokens held by each user at that time of snapshot.
4. Token Swap:
Through airdrop HIVE are received which represents the new tokens at HIVE blockchain. After that it was the choice of users to swap their steem tokens for hive tokens after following some specific rules that are provided by HIVE community.
5. Exchanges:
Token swap is a process that is supported by different cryptocurrency exchanges that in return permits users to deposit their steem tokens and receive HIVE tokens in return so it facilitates the conversion of tokens for users who held their tokens on different exchanges.
Weather it would have been best to use steem blockchain instead, it is very subjective according to me because it all depends upon individual choice and perspective and decision to fork and create hive was driven by keeping in considerations concerns like over governance and centralization at steem blockchain.HIVE blockchain aims to create more decentralized and vibrant platform.
If I talk about in my general words related to success and adoption of blockchain then it depends upon factors that I am highlighting below which includes:
- Community support.
- Mechanism of governance.
- Advancements in technology.
- Experience of user.
Steem and hive both have different features and community and both are you need but still it all depends upon preference of a user if we talk about much better platform from both of them.
There are some risks that everyone should know who is using token swap so token swap using carries some of the risks that are here:
1. Security:
It is very important to use a trusted and secure platform when you are participating in any token swap. You should made a complete research about platform and you should also check for feedback of users so that you may properly verify security measures for protecting your tokens.
2. Scams:
You should take precautions about token swap platforms that are scams or fraud like so for this you should double check the legitimacy of the platform before you are providing any sensitive information or before you are transferring your tokens and for this you should wait for final and official announcements from reputable sources.
3. Smart Contract Risks:
Token swap also use small contracts and small contracts can automate transactions and this contracts are not immune to vulnerability but there may be coding errors as well as some of the hacking attempts in this small contracts that's why to review code of smart contract is very important.
4. Token Value:
Value of token can also be impacted by token swap so before you are going to participate in any token swap you should be considered that what would be the impact on token price and market liquidity because sometimes tokens swaps result in too much fluctuations in price that's why implications understanding is very important.
5. Regulatory Compliance:
Token swaps may also subjected to regulatory requirements. You should have ensure that you are complying with applicable rules related to token swap like anti money laundering and know your customer requirements.
These all were general risks I have shared related to token swap bur for more detailed risks understanding you should give research on your own before your participation in any token swap.
Thank you @khursheedanwar for this informative post about token swaps. Your explanations on what token swaps are & Their Importance during launches are very insightful . The Uniswap V3 Example helps illustrate how blockchain technology Can Enhance the Exchange process.
I appreciate the mention of the Steem to HIVE token swap which Was a significant event in the crypto community . your explanation of the process is clear and easy to Follow .
The risks you highlighted are crucial for Anyone considering a token swap . Security and regulatory Compliance should Always be a top priority . Your comment provides a comprehensive view Of the subject . Well done!
TEAM BURN
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Saludos amigo khursheedanwar.
Excelentes sus palabras para explicar cada pregunta planteada en este reto, los tokens son el resultado o la valía de cada ecosistema su migración o intercambio depende de las acciones propias de la blockchain y es un mecanismo que brinda continuidad a diferentes proyectos.
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Assalamualaikum dear!
You have explored the given topic very well. Your explanation about the token swap are commendable and I must appreciate your research work as well.
It's right. In many of the cases when the old token are completely swapped, the price of those tokens declines a lot. So, it could be a risk in the Token Swap process.
Thanks for sharing and good luck.
Greetings friend,
Token swap is a very important factor to Blockchain as we have seen times and times again where crypto projects started with test tokens that were later swapped to the mainnet.
We've also witnessed have users swapped their Steem tokens for Hive based on the effects of the Steem hard fork. All the best in the contest mate.
A well detailed post on the topic, where in each topic you explained with specific headings and titles. That differentiation help users a lot. Risks are very much, and you did spread these with a well writing.
I extend my heartfelt thanks to @khursheedanwar for this highly informative post about token swaps. Your explanations regarding the essence of token swaps and their significance during launches are profoundly insightful. The inclusion of the Uniswap V3 example brilliantly illustrates how blockchain technology can elevate the exchange process, making it crystal clear for all to appreciate. Great job!
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Hey friend,
Thanks for sharing and making me understand more about the token swap feature, I must say I am pleased.
It's no news now that most project especially crypto related projects have been targeted buy these scammers, so therefore it has been advised that everyone should be more cautious when participating in crypto related activities like token swap
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