A token swap in cryptocurrency refers to the process of exchanging one type of cryptocurrency token for another, often within the same blockchain ecosystem or in a cross-chain manner. Token swaps are usually facilitated by decentralized exchanges (DEXs) or directly within crypto wallets, and they can take place for several reasons:

  1. Token Migration: When a project moves from one blockchain to another (like from Ethereum to its own blockchain), it often requires users to swap the old tokens for the new ones. For example, when EOS migrated from Ethereum’s ERC-20 tokens to its own blockchain, users swapped their ERC-20 EOS tokens for the native EOS tokens on the new chain.
  2. Interoperability and Cross-Chain Swaps: Some swaps enable users to exchange tokens between different blockchains. For example, Atomic Swaps allow peer-to-peer trading of tokens across chains without intermediaries, using smart contracts to ensure the swap occurs only if both parties meet agreed terms.
  3. DEX Token Swaps: Platforms like Uniswap, PancakeSwap, or SushiSwap allow users to directly exchange (swap) one cryptocurrency for another on the same blockchain network, typically with an associated fee and facilitated by liquidity pools. These swaps are popular for exchanging smaller, decentralized tokens without needing centralized exchanges.

Token swaps are critical for maintaining fluidity in decentralized finance (DeFi) and for enabling interoperability across different blockchain networks. They also make it easy for users to trade tokens directly, bypassing the need to convert them into fiat currency first.