3.1.2025
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With hundreds of blockchains and billions of dollars worth of cryptoassets deployed in the decentralized finance (DeFi) ecosystem, there’s a need for trustless crypto trading.
That’s where non-custodial token swaps come in.
This guide explains how token swaps work, how decentralized platforms compare to their centralized peers, and how to swap tokens using Sovryn, the largest Bitcoin-powered DeFi platform.
Token swapping is the process of exchanging one cryptoasset for another directly without converting it into fiat currency first. It’s a straightforward way to move between different assets, such as swapping bitcoin for a stablecoin like DLLR or vice versa.
Token swaps eliminate the need for multiple steps in traditional trading, offering a faster and more convenient method of exchange.
Two primary types of token swaps exist: “regular” token swaps and cross-chain token swaps.
On-chain token swaps are simple exchanges between two tokens on the same blockchain, like swapping ETH for DAI on the Ethereum network. This method allows users to switch between tokens easily without leaving the blockchain they are already operating on.
These types of swaps involve moving tokens across different blockchains. For example, swapping BTC for an Ethereum-based token requires a bridge between the two networks.
Cross-chain swaps allow users to interact across various ecosystems, increasing the level of flexibility and interoperability between blockchains.
On platforms like Sovryn, token swaps are non-custodial, meaning users keep full control of their assets throughout the process. This is in contrast to centralized exchanges, where users must deposit funds and rely on the exchange to execute the transaction.
Non-custodial token swaps occur directly from your wallet, allowing you to maintain full control over your assets throughout the process.
To initiate a swap, you first connect your non-custodial wallet (like MetaMask) to a decentralized exchange (DEX) such as the Sovryn DEX. After the wallet is linked, you choose the token you want to exchange and the token you wish to receive.
Once the swap details are confirmed, smart contracts automatically handle the transaction and make sure that the swap is executed securely without the need for any intermediary to take custody of your funds.
Finally, the exchanged tokens are sent directly to your wallet. This entire process is transparent, as all transactions are recorded on the blockchain.
When deciding between centralized exchanges (CEXs) and decentralized exchanges (DEXs) for token swaps, it's important to understand the fundamentals of how they operate.
Both types of exchanges offer unique advantages and disadvantages, and choosing one depends on your priorities.
CEXs are known for their more beginner-friendly interfaces and higher liquidity, making them a popular choice for beginners and traditional traders. However, these exchanges require you to deposit your assets into their wallets, which means you lose control of your funds.
Additionally, CEXs often enforce Know Your Customer (KYC) requirements, which can compromise privacy.
DEXs offer non-custodial services, which allows you to retain control of your assets throughout the transaction. With increased privacy and security features, DEXs are a better option for users who prioritize anonymity and control of their assets. Moreover, DEXs can now also successfully compete in terms of user-friendliness and liquidity.
However, they might suffer from higher transaction fees during periods of network congestion.
Below is a side-by-side comparison of the two.
To sum up, the choice between CEXs and DEXs depends on your preferences.
If you're looking for simplicity and liquidity, CEXs might be a better fit. However, if security and privacy are your primary concerns, DEXs provide a more decentralized and non-custodial alternative.
Non-custodial token swapping has become the more popular choice among DeFi users due to the increased control and security it offers. However, it comes with its own set of advantages and disadvantages.
Let’s explore the key benefits and drawbacks to help you understand whether non-custodial swapping is the right option for you.
When using DEXs like Sovryn, you maintain full control over your assets throughout the transaction. This reduces the risk of relying on a third party to manage your funds, while the risk of a hack is also lower.
DEXs usually don’t have extensive KYC processes, which means that users can swap tokens anonymously.
Decentralized exchanges are usually accessible worldwide, which means that users can usually trade without any restrictions based on their location or regulatory barriers.
Slippage refers to the difference between the expected price and the final execution price of a trade. This depends on liquidity in a token pair. CEXs can usually offer higher liquidity, resulting in smaller slippage.
Swapping tokens on a DEX involves network fees, which can vary significantly based on network congestion. When network activity is high, these fees can increase substantially, making swaps more expensive.
For beginners, navigating DEXs and handling wallet connections can be more complex compared to the more familiar interfaces of centralized exchanges. Understanding how to operate non-custodial wallets and choose the networks with lowest gas fees also requires additional knowledge.
Swapping tokens on the Sovryn DEX is simple, easy, and secure. Follow the steps to learn how it works.
First, open the Sovryn dapp in your browser. This is where all your decentralized token swaps will take place.
Click on the ‘Get started’ button on the top right, and this screen will appear.
Then, click on the ‘Connect Wallet’ button. Sovryn supports various wallets, including MetaMask, Ledger, and more.
Once connected, your wallet will allow you to access your tokens directly.
The third step is to choose the tokens to swap. To do this, navigate to the “Convert” section on the dashboard.
Select the token you want to swap from in the dropdown menu, such as BNB, and then choose the token you want to receive, like Sovryn’s native token, SOV.
Specify the number of tokens you wish to swap. Sovryn will calculate the equivalent amount of the other token that you’ll receive, showing the exchange rate and any associated fees.
Before completing the swap, review all details of the transaction. This includes the exchange rate, estimated tokens received, and any transaction fees. Make sure everything is correct before proceeding.
The final step is to click ‘Confirm’ to finalize the transaction. Your connected wallet will prompt you to approve the swap, and once you’ve done so, the smart contract will execute the trade.
After the transaction is confirmed on the blockchain, the new tokens will automatically appear in your wallet.
And that’s it! That’s how easy it is to swap tokens in a completely trustless manner using Sovryn.
Click here to connect your wallet to Sovryn to start swapping tokens.
You can swap tokens on both centralized and decentralized platforms. Decentralized exchanges like Sovryn are ideal for users who prefer more control over their funds and enhanced privacy.
Swapping is typically faster and simpler than trading through traditional order books. However, both ways to exchange your tokens have their own drawbacks and advantages, related to control of the funds, privacy, and transaction fees.
The best time to swap crypto generally depends on network congestion and market activity. Typically, the late-night hours UTC time (between 1 AM and 8 AM UTC) on weekdays are considered optimal for lower transaction fees, as fewer users are active during these hours.
