Token Swap: How and Why Digital Asset Exchanges Are Conducted

Token swaps have become an integral part of the crypto ecosystem. When a project requires an update, blockchain changes, or functionality upgrades, there is a need to replace assets. This is what a swap represents — a mechanism for exchanging one digital asset for another under established conditions.

How asset exchange works in crypto

A swap involves replacing an old token with a new one without the usual buying and selling. The user loses the relevance of the old asset and receives a new one instead. Depending on the implementation scenario, this can happen in different ways:

• The owner sends tokens to a designated account and immediately receives new assets
• The (exchange) platform or wallet (admin) automatically performs the exchange on the deposit
• The new asset is credited directly, while the old remains in the account but becomes unusable in the project

The process can occur within a single network or between different blockchains.

Real-world example: BNB history

A clear example of a successful swap is the evolution of BNB. The token was launched in 2017 as an ERC-20 standard on Ethereum, but in 2019, developers decided to migrate it to the newly created native blockchain Binance Chain ###now BNB Chain###. A mass exchange of ERC-20 tokens for BEP-2 was initiated. Many holders follow this transition, although some still keep BNB on Ethereum — the swap is ongoing.

When is a swap necessary

Projects turn to this mechanism in several main situations:

Updates and upgrades. Developers may change the ticker, functionality, or technical characteristics of a token, requiring the replacement of the old version.

Migration to a new blockchain. When a project decides to leave the current network and switch to another, the entire asset is transferred via a swap.

Economic restructuring. Changes in emission models, staking conditions, or other economic parameters often require issuing a new asset.

Merging or splitting projects. During a fusion or split, a new token is created and exchanged for the previous one.

Types of swaps and exchange tools

In crypto expertise, several types of exchange mechanisms are distinguished, depending on scale and technical solutions.

( Atomic Swap

This is a decentralized exchange of cryptocurrencies between two counterparties without an intermediary. Smart contracts guarantee that both parties fulfill their obligations. Users agree on the price and amount of assets, and the system automatically executes a double transaction.

) Cross-chain Bridges

This technology allows moving assets between independent blockchains. There are specialized bridges for:

• transferring tokens of different standards (ERC-20, BEP-20)
• transferring cryptocurrencies built on different technologies (Bitcoin, Ethereum, Polkadot)
• connecting layer 2 solutions ###Arbitrum, Optimism(

Bridges use wrapped tokens, liquidity pools, and relay nodes to facilitate the process.

) Wrapped Tokens

These are digital representations of the original cryptocurrency on another blockchain. For example, wBTC is an ERC-20 token that reflects the value of the original Bitcoin. The custodian trustee organization holds the underlying coin while the user holds the wrapped asset.

The mechanism is simple: the trader sends their coins to the custodian’s account and receives an equivalent wrapped version in return. These assets can be used for trading on decentralized exchanges and enhance interoperability between different networks.

Terminology in the context of swaps

In the cryptocurrency space, there is some terminological confusion. “Swap,” “token migration,” and “coin-swap” are often used as synonyms, although they may technically differ. Migration is the process of moving between blockchains, while a swap is a direct asset exchange agreement. However, for users, it essentially means the same thing: replacing an old asset with a new one.

Forks: similar but different logic

Soft fork and hard fork are similar to swaps but fundamentally different. A soft fork is a code modification of the network without changing the token itself. A hard fork is a radical restructuring that creates a new, incompatible blockchain with a new cryptocurrency. Unlike swaps, forks do not involve direct replacement of one asset with another — they change the system’s architecture itself.