COIN SWAPS: MOVING FROM TOKEN TO COIN
While many hard fork coins are ranked high in terms of market cap, these projects do not represent a majority of cryptocurrencies. Most cryptocurrency projects on the market in 2018 actually start out by launching a digital token rather than a coin. There are several reasons why project teams do this. Many blockchain projects issue tokens during their ICOs with the intention of creating their own blockchain in the future. The process of raising money during an ICO doesn’t require a new project to already have an existing, standalone blockchain. For project teams, it’s easier to raise funds and distribute tokens via an existing blockchain. This reduces potential technical issues and streamlines the entire ICO investment process. Typically, project teams launch testnets of their own blockchains before releasing a publicly available cryptocurrency mainnet. Once a project team is ready to launch its mainnet, it usually conducts a coin swap. This is also known as a token swap. During this event, users are able to exchange their digital tokens for digital coins that can be used on the new, standalone blockchain. In 2018, EOS, Tron, VeChain Thor, and several other projects completed this process.
For investors, it’s necessary to remember that coin swaps can be done manually or automatically. Many exchanges like Binance, for example, have a feature that automatically swaps digital tokens for coins. Investors who store funds in an external wallet will have to go through a few manual steps before receiving new coins.