đź’ˇ TL, DR:
- Crypto swap means exchanging crypto assets from one token to another with the equivalent value.
- Crypto exchange refers to the process of trading crypto.
- Swapping crypto is to change from one token to another to get the benefit from the new one while exchanging crypto is for profit from the selling-buying price balance.
Intro
Crypto swap vs. crypto exchange, are they the same or different? The answer is: They are two separate terms with some key differences in nature.
In this blog post, we will dive deep into each term and analyze its mechanism so that you can learn what distinguishes crypto swap vs. crypto exchange.
Crypto swap: A brief introduction
First, we need to learn what crypto swap is. As explained in the previous article “What is crypto swapping?”, crypto swap refers to the procedure of exchanging crypto assets from one token to another token with the equivalent value.
Types of crypto swapping
There are two types of crypto swapping: crypto-to-crypto swap and project-to-project migration.
Why people choose to swap crypto
There are three main reasons why people swap crypto:
- Cut down transaction fees
First, crypto-swapping platforms offer a cost-effective way to trade cryptocurrencies because they allow for direct, peer-to-peer trading without the need of converting cryptocurrency to fiat currency.
Second, swapping crypto on different sites offer various transaction fees. This range of options allows traders to choose the one with the lowest fee, thereby reducing the overall cost of their trades. With this emphasis on low fees, swapping crypto can be a smart choice for those looking to minimize costs and maximize returns on their investments.
- Diversify cryptocurrency portfolio
There is a common belief that traders should not “put all eggs in one basket.” Most traders never go all-in on a specific token type. They will buy various tokens and swap frequently within the community until they find the best deal.
By diversifying their token portfolio by swapping within the community, crypto traders are more likely to maximize their benefits and minimize volatility risks.
- Trade to a stablecoin
As its name suggests, stablecoins are cryptocurrencies that maintain a stable value, pegged to a fiat currency such as the US dollar.
For example, USDT, which is equivalent in value to the US dollar, is a stablecoin. Many traders nowadays swap various tokens to stablecoin to avoid the volatility of the cryptocurrency market.
Crypto exchange: All you need to know
What about crypto exchange? Is it the same with crypto swapping?
The answer is No.
In short, crypto exchange is the process of buying and selling, or in other words, trading crypto. The final purpose of crypto exchange is all about the profit margin. Meanwhile, crypto swapping is not.
There are 3 platform types for exchanging crypto: decentralized, centralized and hybrid.
Crypto swap vs Exchange: A Comparison Table
We have summarized the differences between crypto swap and exchange below. Take a look!
| Crypto swap | Crypto exchange | |
|---|---|---|
| Purpose | Change from one token to another to benefit from the new crypto. | Trade crypto to gain the margin from the balance between the selling-buying price. |
| Mechanism | Use smart contracts to match pairs. | Use the order book method and smart contracts to process transactions. |
| Transaction fees | Low and insignificant. No network or middleman fee. | Vary. Centralized exchanges are costly (many extra costs). |
Crypto swap vs Exchange – A detailed comparison
Purpose
Crypto swapping and exchanging differ in terms of their purposes.
As mentioned above, there are three reasons for swapping, which include cutting down the transaction fees, diversifying the portfolio and avoiding volatility. We can see that crypto swappers don’t put much priority on profits.
Meanwhile, crypto exchange refers to “sell and buy crypto.” So, people exchange crypto to earn profits based on the balance between buying and selling price. That is the first difference between crypto swap vs. exchange.
Mechanism
The process of swapping crypto starts with the user providing information about the asset they want to trade, such as the type of asset, its value, and the amount they wish to buy or sell. The platform then uses this information to match the user with a suitable counterpart for the trade. This ensures an efficient and streamlined experience for the user.
In contrast, the process of trading on a cryptocurrency exchange operates using the order book method. Essentially, traders indicate their intention to buy or sell an asset and provide an estimated value. The exchange then records and verifies this information using smart contract technology to match buyers with sellers.
Transaction fees
The final point to discuss is the transaction fee of crypto swapping and exchange. For swapping crypto, there are no network fees, no fiat currency conversion balance, and no third-party fee – so you don’t need to pay much extra fee to swap cryptocurrencies.
For crypto exchange, it varies case-by-case. If you choose the centralized exchange method, the fee may be high since you have to pay for third-party as well as network fees. For decentralized exchanges, the fee is lower.
Final thoughts
That is the brief comparison between crypto swap vs. exchange. In short, while exchanging crypto involves both fiat and non-fiat currencies, crypto swapping only utilizes tokens for transactions.
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