Cryptocurrencies and blockchain technologies have provided great opportunities for attracting investment. If earlier the company needed to issue shares and go public, now you can simply issue tokens. To do this, of course, you need to have a blockchain, but it is not necessary to develop it. Many crypto projects provide an opportunity to issue tokens on their blockchain for everyone. For example, we all know the Ethereum cryptocurrency, which enables decentralized applications to run on their own database.
On the basis of Ethereum, a special ERC-20 standard has been developed, within the framework of which tokens are created. Any project can take advantage of this to conduct their own crowdfunding. Also, the ERC-20 standard may become a temporary solution until its own blockchain is created for the cryptocurrency.
And so, at the initial stage of its work, some project issues tokens on the Ethereum blockchain. After collecting the necessary investments by holding an ICO, the project develops and creates its own blockchain. This is where the token swap needs to be done.
Token swap is the process of exchanging coins of a certain cryptocurrency or token for new ones. This is not an ordinary exchange, where some coins are converted into others. Coins are replaced within the project, when the old ones lose their value and other coins begin to operate in their place. Since changes occur at a technical level and affect the blockchain, users need to perform some actions in order not to lose their money.
What is a crypto exchange?
A cryptocurrency exchange is a modern computerized platform where cryptocurrency pairs are traded, that is, on a cryptocurrency exchange, you can exchange between cryptocurrencies or exchange them for major fiat currencies (US dollar, euro). The main users of cryptocurrency exchanges are traders, investors and miners where they can purchase any crypto they want, such as buy dogecoin with Paypal.
Why do you need a crypto exchange?
On the crypto exchange, it is possible to carry out the following areas of activity.
- Trading cryptocurrency
On crypto exchanges, you can carry out trading operations by analogy with stock exchanges. The main advantage of an exchange for trading digital assets is the higher volatility of the cryptocurrency market compared to the stock market.
Operations in the cryptocurrency market can bring a trader an income that is many times higher than the profitability of transactions in the stock market.
To conduct successful transactions, a trader needs to have experience, study market information and develop a risk management strategy.
There is a possibility of conducting arbitrage transactions, i.e. simultaneous trading operations on several exchanges and receiving income from exchange rate differences for cryptocurrencies at various exchanges.
- Investing in cryptocurrencies
Medium or long-term investment in cryptocurrencies. Investing implies a less active way of trading. The main activity of the investor is the formation of an investment cryptocurrency portfolio.
How does a crypto exchange work?
How the crypto exchange works:
- to work on the exchange, you need to register a personal account and top up the account balance;
- place an application (order) to buy or sell cryptocurrency through a specialized terminal for trading cryptocurrencies. The order will remain in the system until it is executed, i.e. Counter action of another market participant. The exchange, in turn, charges a commission for the execution of the order.
- withdrawal of cryptocurrency from an account to a third-party cryptocurrency wallet is possible for a commission set by the cryptocurrency exchange.