A ‘Token Swap‘ is a process that transfers the digital tokens from one blockchain to another. In a token swap the number and symbol of the token/cryptocurrency remain the same, however, the coins further on will be stored on a different blockchain. Hence, new addresses are generated, and funds are transferred to existing users. A ‘token swap‘ or a ‘token migration’ is fundamentally different from an Atomic Swap.
Tokens are generally created on another Blockchain like Ethereum to raise funds. They outline their road-map of the swap while providing the same services on Ethereum that they would later perform on their Blockchain. E.g. EOS.IO was released as an ERC-20 token in June 2017 last year, they provide a platform for C++ smart contracts and follow DPOS consensus algorithm. In 2018 they have launched their own independent blockchain after what is called the ‘mainnet’ launch. EOS blockchain and smart contract layers not executed on top of the EVM. EOS is no longer a side chain on the Ethereum network.
The ‘token swap’ usually involves a registration or a claiming process, to assign new addresses to older users with the same balance. Nevertheless, the deadlines for these processes is kept months apart so that it gives enough time to users.
The ‘token swap‘ is performed to address the bottlenecks in the existing platform. The EOS and Tron tokens have all migrated their tokens to address the scalability and high gas fees issues faced by the Ethereum Blockchain, providing support to a massive volume of transactions faster than ever.The EOS and Tron tokens have all migrated their tokens to address the scalability and high gas fees issues faced by the Ethereum Blockchain, providing support to a huge volume of transactions faster and cheaper than ever. Click To Tweet
Token swaps are performed as an update to the cryptocurrency, and the market remains unaffected. Nevertheless, the price of the cryptocurrency might be affected if the swap brings assurance of improved speed and scalability, it might also have detrimental effects on the rate of the Blockchain currently hosting the token.
In 2017, Ethereum was established as the leading platform for smart contracts and hosting Blockchain. Storj, a blockchain storage service; due to scalability issues and high transaction fees with Bitcoin, was the first cryptocurrency to ‘swap’ its Storj coins tokens from Bitcoin to Ethereuem.
EOS and Tron are the most popular cryptocurrencies to undergo ‘token swap‘ from Ethereum in 2018. They swapped their ERC-20 Tokens for the tokens on their independent blockchain. The old Tron or EOS tokens on the Ethereuem Blockchain have been deleted, or the addresses have been rendered useless. Tron token is now following the TRON-20 protocol instead of ERC-20 protocol; hence the new wallets must update their applications as well. Ontology is in the process of ‘token swap‘ and has allotted users a decent time-frame extended till 1 October.
What To Do During a ‘Token Swap‘?
The exchanges or the developing teams take responsibility for the swaps and publish guidelines for the users. All the exchanges supporting the ‘token swap’ handles the swap on behalf of their clients. The exchanges including Binance, Bitfinex, and Kraken published guidelines about the timing of the swap and the mention of arbitrary time-frame required to execute the swaps. The users are unable to send or receive the tokens while the exchanges are performing the swap, nevertheless, after the swap they only see a change in the address of their tokens, the number and price remain unaffected because of the process.
The ‘swap’ can also be performed independently by a user on the website or Mobile App wallet released by the developers. Token holders might be asked to register their tokens ahead of the token swap deadline to ensure they will be migrated onto the new blockchain. This process is also referred to as “mapping”. The users might also be to asked to send all their ‘tokens’ to a particular address, and the same gets credited in a ‘new address’, the old address, hence, must have zero tokens.