Swapping in Cryptoland

For those just getting into cryptocurrencies, learning the terminology can prove to be a daunting task.  In this article, I’ll distinguish between various forms of swapping, including coin swaps, token swaps, and atomic swaps.  While researching this topic, I discovered that there were no universal terminology guidelines. As a result, I found myself bumbling around various discussion forums cross-referencing inconsistent applications of these terms. These inconsistencies make it very difficult for anyone to make informed investment decisions about cryptocurrency.  Before we delve into what each swap means, we must first get a grasp on a few other terms.

ERC-20 Tokens

The term “ERC-20” is a standard that tokens must meet to become tradable on the Ethereum network.  ERC-20 tokens are different than standalone coins because they run on the Ethereum blockchain. As such, developers are able to build their own decentralized applications on top of them.  Indeed, developers frequently integrate these tokens into their application. For example, tokens that can fully interact with smart contracts can be used as a form of settlement or a transaction of value.  Likewise, the XTRABYTES development team is creating a modular blockchain platform that can host a new type of token, in a similar way to ERC-20 tokens. The platform will be infinitely scalable and highly flexible, allowing developers to code in any programming language.

Initial Coin Offering or ICO

When a development team launches a project, coins or tokens are sold to investors as a way to fund the project.  During an ICO period, coins and tokens simply represent ownership and are not actively traded on a network.  So what’s the distinguishing difference between a coin and a token?  Coins are a standalone currency, used primarily for transactions, whereas tokens have specific functions within specific host applications. These functions give them value in the market.  An example of token functionality would be the ability to give users of a social media application tokens instead of an upvote or a thumbs up. A user who receives several tokens for their efforts will likely have a strong influence, giving value to the token.

Coin Swap vs Token Swap

There is essentially no difference between a coin swap and token swap. The only difference is in the semantics discussed above.  Take for example CasinoCoin (CSX), a standalone currency currently going through the process of a swap.  CasinoCoin is moving from a Litecoin-based blockchain to a Ripple-based blockchain to facilitate faster transaction speeds, better security, but also to increase the coin supply. This process has been referred to as both a coin swap and a token swap.

Most coin swaps will be handled the way CSX is handling their transition.  Original coins need to be stored in their original wallet.  If coins are stored on a third-party exchange, they then need to be transferred from the exchange to the old wallet.  From this point, users need to download the new wallet and acquire a coin swap address.  How the coin swap address is distributed may vary from project to project, but in this case, it is generated in the new CSX wallet.  Lastly, the user sends the old coins to the coin swap address generated by the new wallet.  The corresponding coin’s development team determines the time it takes to receive the new coins.  For comparison, QTUM was an ERC-20 token that recently went through a swap that was handled in a very similar way. The only difference here is the fact that QTUM was classified as an ERC-20 token running on the Ethereum blockchain.

Although coins are occasionally left on an exchange during the swap process, it’s not particularly safe for some coins.  For some projects, users may not be required to transfer coins directly between their wallets. However, their coins are at risk of becoming stuck in an exchange during the swap process. In contrast, direct coin swaps with one’s personal wallet are typically quick and seamless.  The difference in speed can be attributed to the time it takes for developers to notify the exchange and for the exchange to expedite the process.

Okay, so What’s An Atomic Swap?

Atomic swaps are the direct exchange of one cryptocurrency for another with no intermediary.  Without getting too much into the technical details, it’s an extremely important cog in the gears of decentralization.  The technology will allow users to make transactions from one blockchain to another, eliminating the need for a centralized exchange and therefore cutting out exchange fees; something the XBY team is going to implement with X-CHANGE.

In my experience, researching this topic can be confusing if not discouraging at times. Many new investors are quickly scared off by the loose terminology floating around within communities.  However, it’s important to make conscious investment decisions based on knowledge and research.  Fortunately for XTRABYTES investors, a solid team and vibrant community exist behind the project. They’re willing to do what is necessary to help instill investors with confidence.

Would you like to know more?

We don’t just publish articles, XTRABYTES™ is a whole new blockchain platform that allows DApps to be programmed in any language, utilizing a new consensus algorithm called Proof of Signature. In doing so, XTRABYTES™ presents a next – generation blockchain solution capable of providing a diverse set of capabilities to the general public.

You can learn more on our website where you can also help to spread the word through our bounty program and get rewarded in XFUEL™, or join our community and hop into the discussion right now!

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