Token swapping is exactly what it sounds like: you trade one token for some amount of another. The end result is essentially the same as a trade, but the term “swap” in DeFi usually means that you’ve interacted with a token liquidity pool (versus a trading exchange).
When you trade tokens on an exchange, you place a buy or sell order and wait to be matched based on your desired price. If you choose the market price, typically your order is matched immediately. If you set a limit price, you may have to wait a while for someone to accept it.
You are trading with individual accounts in this case. The exchange will usually take a small fee for every trade.
Swapping is a little different. There is no waiting, and the price is not negotiable. You are not interacting with individual accounts, but rather with an automated pool of funds. People often refer to this as ‘automated market making’ or AMM.
Let’s say you were looking to swap ETH for DAI. You’d need to find an ETH-DAI liquidity pool. This pool would have some amount of ETH and some amount of DAI in it (the more of each the better!)
The swap is you placing ETH into the pool and taking DAI out. The pool takes a fee, and splits that fee up to all the people who filled the pool up with those stockpiles of ETH and DAI. Learn how to provide liquidity here.
https://www.tiktok.com/@rabbithole_gg/video/7127579987380718894
Swapping is pretty simple on the surface, but it pays to understand some of nuances behind things like: