What is Swaps?
In decentralized exchanges, swapping refers to the process of exchanging one cryptocurrency for another directly on the blockchain without the need for an intermediary. Users can swap tokens using these platforms by providing liquidity to a pool, which allows others to trade between the tokens in the pool.
Here's a basic overview of how swapping works on exchange:
Select Tokens: Users choose the tokens they want to swap. For example, they might want to exchange Ether (ETH) for DAI.
Specify Amounts: Users specify the amount of the token they want to swap. They can either enter the exact amount they want to swap or use the available liquidity in the pool.
Price Calculation: The exchange calculates the price of the trade based on the ratio of tokens in the liquidity pool. The price is determined by a formula that balances the ratio of tokens in the pool.
Transaction: Users approve the transaction using their wallet. The exchange executes the swap, and the tokens are exchanged directly between the users' wallets and the liquidity pool.
Confirmation: Once the transaction is confirmed on the blockchain, the swapped tokens are transferred to the users' wallets.
Swapping on our exchange is popular due to its decentralized nature, which eliminates the need for traditional order books and allows for peer-to-peer trading.