What is Swap Cryptocurrency and How Do They Work?

As the crypto market evolves, new projects appear with their blockchains and tokens aiming to achieve some specific goals. Some target beating Ethereum and offer developers improved scalability, little to no fees, and other perks. Others are created to be used only within decentralized applications such as online casinos or crypto loan services.

Eventually, this incredible diversity of options leads you to a need to swap cryptocurrency for another.

Read this guide to find out what methods of switching cryptos exist, what pitfalls cryptocurrency enthusiasts may encounter when trying to do this and what solutions they offer to solve those challenges.

One Does Not Simply Exchange Tokens

So what’s the problem with sending funds from one blockchain to another?

The world of cryptocurrencies is tricky. You should be careful when you send bitcoins from one address to another. Make a single typo, and your funds will be lost with no chance of recovery. The same will happen if you try to send Bitcoin to an Ethereum address or vice versa.

As each blockchain operates in its universe, there is no easy way to establish connections. Some projects work on resolving this interoperability problem, such as Polkadot, Cosmos, Chainlink, and others. But all of them target developers rather than end-users, leaving the latest ones in frustration.

Some workarounds have been invented, each with its own set of obstacles. Let's review some of the most popular options.

How To Swap Crypto: 3 Ways To Exchange Cryptocurrencies

For a non-tech-savvy user, these are the three most widely used methods to swap cryptocurrencies: OTCs, centralized and decentralized exchanges. Let's take a look at their benefits and drawbacks.

Centralized Exchanges

As the popularity of cryptocurrencies significantly increased over the past years, many centralized exchanges have appeared to meet the demand. Typically, they compete with each other by the number of trading pairs. When you are swapping cryptocurrency, a trading pair lets you make the exchange at a reduced cost or even free.

However, such diversity comes at a cost. The target audience of such exchanges consists mainly of traders, making the platforms adjust their offers accordingly and not making it any easier for usual people to get involved.

Decentralized Exchanges

DEXs were invented in the first place as an alternative to centralized exchanges and have managed to overcome some of their issues.

They do not require verification as the funds are transferred between users' wallets. Being 'decentralized,' they do not depend on any central server and are accessible anywhere in the world.

OTCs

Over-the-counter exchanges or, shortly, OTCs are, perhaps, the easiest way for a non-tech-savvy user to exchange cryptocurrencies. Typically, they are integrated with centralized exchanges via API and provide users with a simple interface without all these confusing graphs.

The experts have developed a way of exchanging cryptocurrencies that eliminates the problems associated with the methods above and makes the whole process simple. This is how to swap cryptocurrency if you don't have the time or inclination to become a blockchain programmer.