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Cross-Chain Swaps: What Are They & How Do They Work?

Not too long ago, the only way to convert a token from one blockchain into a token on another was going through a centralized crypto exchange. Thanks to innovations in DeFi, however, that’s no longer the case. Now, you can seamlessly swap tokens across blockchains using a cross-chain swap right in your Magic Eden Wallet. 
Cross-Chain Swaps: What Are They & How Do They Work?

Not too long ago, the only way to convert a token from one blockchain into a token on another was going through a centralized crypto exchange. Thanks to innovations in DeFi, however, that’s no longer the case. 

Now, you can seamlessly swap tokens across blockchains using a cross-chain swap right in your Magic Eden Wallet. 

Read on to learn about cross-chain swaps, how they work and how you can swap tokens across multiple chains.

TL;DR 

  • A cross-chain swap is the process of exchanging tokens between two different chains without a third party.
  • They let users swap their tokens near instantly and facilitate trustlessness, interoperability and an overall better trading experience.
  • You can use Magic Eden Swaps for fast and easy cross-chain swapping.

What Is a Cross-Chain Crypto Swap?

A cross-chain crypto swap is the process of exchanging a token between two blockchains without relying on a third party.

Instead of using a third party like an exchange to convert tokens, a cross-chain swap uses smart contracts to exchange one token on one blockchain for a token on another while ensuring the security and authenticity of the transaction.

This lets you skip the waiting times associated with transferring tokens to exchanges, trading them on those platforms, and then withdrawing them back to your wallet. 

You’ll also likely save on fees. Cross-chain swapping is generally cheaper than going through centralized exchanges.

How Do Cross-Chain Swaps Work? 

Cross-chain swaps differ in many ways depending on the type of swap you need them to achieve. However, they generally rely on two independent users swapping their tokens for each other. The swapping parties may know each other, i.e., be in direct contact or connected through different swapping providers.

In most cases, the swap is facilitated through a smart contract that’s specially designed to ensure only the two participants have access to their funds. 

This contract uses an escrow feature (secured by cryptography) to ensure each user will access their funds at the same time. This means nobody can cheat the smart contract into keeping their funds as well as the swapped tokens.

Some blockchains, like Polkadot and Cosmos, connect several chains, enabling swaps using their own technology. This means no additional providers are needed, as the blockchains offer this feature by themselves.

In most cases, however, you have to use a swapping service like the one offered by Magic Eden Wallet.

Types of Cross-Chain Swaps

There are four main types of cross-chain token swaps currently available. They work in slightly different ways. These are:

  • Hash Time-Locked Contracts (HTLCs): HTLCs are a type of contract that enables the creation of time-bound transactions between users. In this approach, only the two chosen users can access the place where the funds are deposited after a specified amount of time. This ensures a clean swap with no risks of interference or malicious acts.
  • Over-the-counter (OTC) cross-chain swaps: An OTC swap also includes two users but without the security of HTLCs. This is only recommended for high-trust scenarios where users know each other.
  • Interoperability platforms: Some networks offer avenues of communication between different blockchains, so they handle the whole process of swapping the tokens for each other.
  • Proxy tokens and wrapped assets: This type of swap is commonly also known as bridging. It refers to the process of replacing one token for its equivalent on another chain to use it in this new ecosystem.

What are the benefits of Cross-Chain Swaps?

Cross-chain crypto swapping lets you near-instantly trade one cryptocurrency for another without having to mess with fiat or go through a centralized crypto exchange. It’s quicker, often cheaper, and gives you access to a broader range of tokens. 

Most swaps happen on decentralized platforms, giving you more privacy and control compared to centralized exchanges. Finally, swapping makes cross-chain transfers super easy, so you can move assets between different blockchains without breaking a sweat.

Users of crosschain swaps benefit from

  • Interoperability: Being able to access and use protocols and apps across blockchains
  • Trustless Ownership: Users do not need to trust a 3rd party such as a central exchange
  • Better Experience: Instead of multiple steps, crosschain swaps give you the ability to swap tokens on one chain to another in one simple step

What Are the Risks of Cross-Chain Swaps?

Though cross-chain swaps are largely safe, there are some risks associated with using them if you’re not careful about the source of their smart contracts. These include:

  • Smart contract vulnerabilities: Malicious actors can either take advantage of vulnerabilities in poorly designed smart contracts.
  • Custodial risks: If the cross-chain swap relies heavily on centralized entities, you’re at a higher risk of losing your funds.
  • Potential complexity: Poorly designed swapping services can be too technical for some users, which is why it’s important to find a user-friendly service.

All of these risks depend on the type of service you’re using. If you’re going with a well-known, established and widely trusted service like Magic Eden Swaps, you’re already mitigating these risks.

What's the difference between cross-chain swaps and cross-chain bridges?

Cross-chain swaps and bridging are two similar concepts in blockchain technology.

Typically, a cross chain bridge will transfer one token for it's equivalent on another chain. Examples include bridging Ether from Ethereum to Base, or transfering funds from Etherum to Abstract chain using Abstract Bridge

Cross-chain swaps not only transfer funds, but also faciliate exchanging the asset you transfer for another. You can think of it as a two step process. For example, if you had funds on Ethereum and you wanted to buy a Solana meme coin, you could do this easily with a cross-chain swap. It would first transfer funds onto Solana, and then use a Solana swap to purchase the Solana meme coin you wanted.

How to Do a Cross-Chain Swap Using Magic Eden Wallet

Cross-chain swaps are a built-in feature on the Magic Eden Wallet. This saves you the hassle of having to transfer funds to an exchange, sell them, buy the tokens you want, then send them back to the wallet. 

Instead of that tedious process, you can do it in a few seconds or minutes through the ME Wallet.

We’ll assume you’ve already installed the Magic Eden Wallet and completed the setup process on either your mobile phone or desktop browser. So now, we’ll walk you through swapping your funds using the wallet’s cross-chain swap.

  • Tap the ‘bidirectional arrow icon’ at the bottom-left of your screen, just beside the home icon.

Under the Swap option, you’ll get to choose which token you’re offering and which one you’re getting in return.

  • When you enter the amount (either in crypto or its fiat counterpart), the wallet will automatically fill in the corresponding amount in the other token’s field. It will also show the network fee just underneath. 

After this, just click ‘Swap’. Easy peasy!

Because ME Wallet uses third-party API partners for swapping, it’ll take several minutes for the swap to complete. However, the wallet allows you to continue doing other things, while it finishes the swap for you in the background.

How to Do a Cross-Chain Swap Using Magic Eden Swaps on Web

Cross-chain swaps are built into the Magic Eden interface. You can find the Swap feature in the upper left part of the screen, right next to the Search bar. This saves you the hassle of having to transfer funds to an exchange, sell them, buy the tokens you want and then send them back to the wallet. 

We’re assuming you’ve already connected a supported wallet to the Magic Eden marketplace. 

  • Click on the Swap option in the web app to get started.
  • Find the token you want to swap, then the one you want to receive in return. 

    Make sure you’re checking the right chain. You can use the drop-down menu to find the chain and then either scroll to find the token or enter the name into the search bar.
  • Enter the amount you want to pay. The appropriate amount you’re receiving will fill out automatically. Check the details and click on Swap.
  • Confirm the transaction in your wallet when prompted and wait for the new token to land there. It’s that simple.

Depending on the chain, cross-chain swaps can take more time for confirmation - in some cases several minutes. However, the marketplace allows you to continue doing other things as it finishes the swap for you in the background.

Download Magic Eden Wallet to Start Swapping Tokens

Cross-chain swaps simplify how we move assets from one blockchain to another. You also enjoy flexible fees and minimum slippage without having to go through multiple third-party exchanges.

Download Magic Eden Wallet now to take advantage of seamless swaps, easy bridging and fast wallet top-ups.

FAQs

What is the fastest way to swap crypto?

The fastest way to swap crypto is arguably using a wallet’s built-in swap option. The Magic Eden Wallet offers this feature. It only takes a few seconds to set up, and once you click ‘Swap,’ the process is complete within a couple of minutes. It usually doesn’t take long to swap tokens across different chains.

What is the best time to swap crypto?

While traditional markets have opening and closing times, crypto markets are available 24/7. Still, the best time to swap crypto is when network activity is low, which tends to be early in the morning or late at night. 

Usually, markets will be busier (and fees higher) during working hours. Try to aim for just before and just after your working hours, but for optimal results, keep US working hours in mind as well—after all, it’s one of the biggest crypto markets. 

You could also check gas trackers for different blockchains to see when the fees are at their lowest. Whenever you’re ready, the ME Wallet only takes a few clicks to finish the swap.

What’s the difference between a cross-chain swap and a bridge?

A cross-chain swap lets you exchange any token for any other token as long as the swapping provider offers both tokens that you want. A bridge is a way for one token to work within another blockchain. When bridging, you’re creating the same token (but in wrapped format) on another chain in order to be able to use it. When swapping, there are no such restrictions.

What’s the difference between an on-chain swap and a cross-chain swap?

An on-chain swap means swapping tokens on the same blockchain, such as swapping one ERC-20 token for another on Ethereum. Your tokens aren’t leaving the ecosystem, as both are based on the same chain. A cross-chain swap means taking the leap from one blockchain to another, like swapping BTC from the Bitcoin network to ETH on Ethereum.

Is swapping crypto safe?

Yes, swapping crypto is generally safe. It’s enabled through smart contracts, which are specially designed to be secure. Since there is never a guarantee that something is completely safe, it’s a good idea to use secure and audited service providers. The Magic Eden Wallet uses the best security practices.

What is an example of a cross-chain transaction?

A cross-chain transaction would be swapping ETH for BTC without using an intermediary. These two cryptocurrencies are on different blockchains and operate completely separately, but many people want to swap them for each other. Using Magic Eden Swaps, you can do that quickly and easily.

What is a cross-chain atomic swap?

A cross-chain atomic swap is a swap in which the tokens are exchanged directly, without an intermediary and near-instantly, with no escrow or long waiting period. This is a revolutionary concept in blockchain technology, since it makes it possible to remain decentralized and trustless, at the same time getting all the benefits of speed and utility.

The information provided on this website is provided for general educational purposes only and is in no way financial or investment advice. Certain information may have also been provided to us or prepared by third parties; these materials are provided for convenience and are not an endorsement by Magic Eden. Magic Eden is not liable for any errors, changes or amendments to such information, including any actions taken in reliance on such information.

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