💲 Trading and Swapping

One of the most common situations in DeFi is swapping. How does it work? How should I do it?

Token Faucet

What it is: A faucet is a tool that dispenses free tokens for testing and educational purposes.

How to use:

1. Navigate to the Faucet page

2. Select the token you want to receive

3. Click "Request Tokens"

4. Receive 100 tokens instantly

Available tokens: The platform supports 100+ tokens including:

• Major cryptocurrencies (ETH, BTC wrapped versions)

• Stablecoins (USDT, USDC, DAI)

• DeFi tokens (UNI, AAVE, COMP)

• Meme tokens (DOGE, SHIB, PEPE)

• Layer 1 tokens (SOL, ADA, DOT)

Real-world equivalent: In real blockchain networks:

• Testnets have faucets that dispense free test tokens

• Mainnet tokens have real value and must be purchased

• Faucets help developers test applications

• Some projects offer small token distributions for marketing

Token Swapping

What it is: Token swapping is the process of exchanging one cryptocurrency for another directly, without using a centralized exchange. This is the fundamental operation of any DEX.

The mechanism - Automated Market Makers (AMM): Unlike centralized exchanges that use order books, DEXs use AMMs:

• Liquidity Pools: Pairs of tokens locked in smart contracts (e.g., ETH/USDC)

• Constant Product Formula: x × y = k (maintains balance)

• Price Discovery: Prices adjust automatically based on pool ratios

• No Order Books: Trades execute instantly against the pool

How to perform a swap:

1. Navigate to Swap page

2. Select "From" token: The token you want to exchange

3. Enter amount: Type the quantity you want to swap

4. Select "To" token: The token you want to receive

5. Review details:

   • Exchange rate

   • Price impact (how your trade affects the price)

   • Minimum received (accounting for slippage)

   • Trading fee (typically 0.3%)

6. Configure settings (click gear icon):

   • Slippage Tolerance: How much price movement you'll accept

     • Low (0.1-0.5%): For stable pairs like USDC/USDT

     • Medium (0.5-1%): For most token pairs

     • High (1-5%): For volatile or low-liquidity tokens

   • Transaction Deadline: Time limit for transaction execution

7. Execute swap: Click "Swap" button

8. Confirm transaction: Approve in the confirmation dialog

Understanding key concepts:

Price Impact:

• The effect your trade has on the token price

• Larger trades = higher impact

• Formula: (Amount / Pool Size) affects price exponentially

• Example: Swapping $100 in a $1M pool = minimal impact

• Example: Swapping $100k in a $1M pool = significant impact (5-10%+)

Slippage:

• The difference between expected and executed price

• Occurs due to price changes between submission and confirmation

• On busy networks, prices can change in seconds

• Set too low = transaction may fail

• Set too high = you may get a worse price than necessary

Arbitrage and MEV:

• Traders monitor pools for price discrepancies

• Bots can front-run your transaction for profit

• This is why slippage protection is crucial

Real-world application:

• Uniswap processes billions in daily volume using this exact mechanism

• Traders use DEXs for tokens not listed on centralized exchanges

• Privacy-conscious users prefer DEXs (no KYC required)

• Geographic restrictions don't apply to DEXs