Hi there đź‘‹
A swap is a fundamental DeFi operation that allows users to exchange one token for another directly on a decentralized exchange and on a single network.
When you perform a swap, you trade a specified amount of one asset for another through a smart contract, most commonly via an Automated Market Maker (AMM). The exchange rate is determined algorithmically based on the pool’s available liquidity and current balances, and the trade is executed instantly on-chain without relying on intermediaries.
This convenience comes with certain risks and costs, because prices can shift during execution due to slippage, especially in low-liquidity pools or during periods of high volatility. Swaps also involve trading fees and exposure to smart contract risk. In fast-moving markets, large swaps can significantly impact prices, making execution quality an important consideration for users.