Definition
A swap in the DeFi context is an exchange of one token or asset for another. Users commonly interact with liquidity pools, aggregators or other trading mechanisms through a wallet. This usage differs from a financial derivative that exchanges future cash flows, which may also be called a swap.
How It Works
The user specifies an input or desired output, and the service estimates a route and execution amount. Price impact reflects the trade’s effect on available liquidity, while slippage concerns a difference between the quoted and executed result. An on-chain trade can apply a minimum output or other limit and revert if conditions are not met.
Key Considerations
A quote is not necessarily a guaranteed execution price. Trading fees, network fees, transfer restrictions and token behavior can affect the outcome. Token approvals may also give contracts continuing spending permissions beyond a single trade. Check the exact assets, network, route and output conditions. A successful swap confirms execution under the contract’s rules, not the economic quality or legitimacy of the asset received.