Bitcoin Forum

I've been confused for a while on what happens to a particular cryptocurrency when swapped to another. I mean when a swap may be BNB to get usdt, what happens to the BNB?

Another confusion I have is about BTC.
BTC has a total supply of 19,495,156 million. Now the entire 19,495,156 are in circulation which means they are being held by holders/users. But another user can always swap another coin to BTC at anytime and receive the BTC, so where is the BTC coming from since it already in circulation (held by other holders)?

The answer is the exchange hold a lot coins, when you swap BNB to get USDT, they will give their USDT and receive your BNB.

AFAIK there's no way to swap another coin to BTC, you're high likely talk about fake BTC e.g. Wrapped Bitcoin.

The terms is "exchange" or "trade" in Bitcoin, if you exchange a USDT for BTC, it's not mean the exchange is generate more Bitcoin (except they're a miner like Binance), they just simply have a lot BTC in their hot wallet.

Aside that exchanges holding them, those hold by these exchanges are the ones that they have approved and enlisted on their currency list, aside this, exchanges also engage in their pairs with other well recognized currencies and exchange them for users on request as well, those who are willing to hold such currency look for it pairs and make an exchange for their desired currency, exchange market will always be available as long as the coin has a high market cap and people are still investing on it.

Coin type hand exchange always happens every day on the exchange. You exchange BNB for USDT, the exchange will verify your request, that's when the coin transfer process occurs. Just like the BTC exchange process, every day there is demand and supply, in simpler terms to make it easier for you to understand this process. When you buy Bitcoin there is always someone selling it.
Bitcoin rotation will always be on its axis, the exchange process will continue as long as Bitcoin can still be exchanged.

The simplest but most confusing question, we all newbies have faced, the simplest answer is don't look at the one side of the picture, this means if someone is swapping BNB for USDT then look at the other side of the picture which is there is another person who wishes to swap his USDT for the BNB. But now you will think what if there is no other person at the time of swapping of BNB looking for USDT? Then your BNB will be swapped from the pool of the platform, pools are made for seamless trading without any stop. I hope you understand. If not then don't hesitate to ask again.

BTCs don't have a supply of 19,495,156 million in total, because the total supply is round off to 21 million. The supply you have mentioned is the one which is mined till now and is already in circulation. And the answer to your query is almost the same as the first one.

As if one is selling the BTC then there is another person at the other end buying it too or vice versa. And if there is no other entity then the funds will be provided from the pools of the exchange or swap you are using to swap sell or buy the BTC. Let's say you wanted to sell the BTC and wanted to buy USDT in exchange and you have selected the BTC/USDT pair and once you hit the sell button you will quickly get usdt when your selling price will hit.

And the USDT will be given to you from the pools of USDT money. And that gap will be covered later once a person looking to sell USDT in exchange of BTC.

Swapping one cryptocurrency to another one is for decentralized exchanges with smart contracts.

It is not directly from a buyer to a seller but from a buyer or seller to a liquidity pool. A bigger a liquidity pool is, a less slippage for a swap with same trading volume in most of cases but it is not always true. Slippage is also set up by developer team of that token that can be low or high, it depends on developers.

Because it is related to liquidity pool, if a developer team rug the pull, liquidity pool will become zero, consequently that token will become zero value.

What are liquidity pools ? (https://www.coindesk.com/learn/what-are-liquidity-pools/)
What is a rug pull? (https://www.coindesk.com/learn/what-is-a-rug-pull-how-to-protect-yourself-from-getting-rugged/)

When you swap/convert from one coin to another in an exchange, the exchange basically takes your coin and adds it to their reserve or pool and they also send you the coin you've swapped to from their reserves as well.
It is simply supply and demand. Exchanges for example hodl quite a lot of Bitcoins that are in circulation, so you can always buy Bitcoins from them, or convert from Bitcoin to other coins. There's also p2p trading, were individuals are ready to sell their Bitcoins to you for fiat, or they could as well want to swap their Bitcoins for the coins that you are offering.

Your swap is only filling open orders in exchanges.

Someone has a buying usdt order and you fill it with bnb when you swap it.



It comes from another open order.

Someone put a price to sell btc for some coin, and when someone wants to swap another coin for it , that order gets filled.

Most orders and bot generated AFAIK, to try to get profit out of small spreads between exchanges/coins pairs.

The person (in case of p2p) or exchange you’re swapping with takes your coin and give you the one which you require to swap to. In this process, no new coins are created or consumed. It's similar to trade by barter. We compare costs and then exchange them since I have what you want and you have what I want. They may be a time when a coin you wish to swap with is not available in an exchange, but since they have listed it, they will never run out of it when their users require it.


The platform that you're using to do this trade is doing it for profit, so keep in mind that they'll definitely have a lot of it in stock for their customers to always buy from and swap with their currencies. They can always top up when there is a high demand for one that can lead to its exhaustion, allowing them to continue providing their services. 

You are totally right, but you should also shed light on when there are fewer buyers or sellers, let's say if a person wants to sell BTC but there is no buyer then who he will sell them? Every exchange has its own liquidity pools or proof of reserves which shows that they can process big trades easily.

For example, if the pool has a limit of 10 BTC then trade with bigger than 10 BTC has to wait. Until the pool size increases or until there come buyers for the deal worth 10 BTC.

The total supply of BTC is 21 million and the circulating supply is the one which you have mentioned above, and despite the holders and users or traders, BTC will be tradeable until their is a buyer or seller and the pools which are keeping the books clean and unstoppable. Some users have shed light on the pools even tranthidung mentioned some useful threads for you to read.
there
I suggest you read them fore a better understanding.

When you swap BNB to usdt, you add BNB to the liquidity of BNB/USDT. Then you remove usdt to your wallet. So, this will reduce the value of BNB a bit cos the Liquidity pool must be balanced.
But for Bitcoin, Lemme say millions of people are buying and selling bitcoin daily. If you see the trading volume, you will know. So, there is always enough buy orders for sell orders.

The value of a cryptocurrency will not drop because there was a swap or trade involving it. Coin trackers take aggregate from different exchanges and reach an average price, so after each trade there might be an increase or decrease in the value or no change at all.

Also note that not everyone withdraws to their personal wallet after swapping a coin so there's not always an addition to liquidity.

Have you ever studied the barter system, this type of transaction method is carried out by exchanging goods. The party providing the service will provide a number of items belonging to them to the second party in the same amount as those exchanged. When you exchange BNB to get a certain amount of USDT, the exchange will give you the same amount of USDT that they have stored or the exchange will convert the amount of USDT to be equal to the amount of BNB you exchange.

The service system offered by the exchange platform makes it easy for you to make exchanges quickly and easily, they also charge a fee when a transaction occurs as their service. Simply put, when you open a coin barter service or independent exchange service, you must have a stock of coins that will be exchanged by clients, you also charge a fee for the services you offer.

When you swap a coin, for your example you said swapping BNB with USDT, so there are basically pools in the trading system. In your case, we are talking about BNB/USDT pool. It's mostly 1:1 so when you swap BNB worth $500, they pay you $500 from the pool as USDT and then they automatically convert the BNB with the current price to USDT. You are giving them BNB worth $500, so they instantly make the pool 1:1 again by converting some of that BNB to USDT according to their pool price.

Liquidity pools are for tokens and decentralized exchanges, it is not for coins and centralized exchanges.

I hope that no newbies will be confusing between Bitcoin BTC and Wrapped Bitcoin (tokens). With Wrapped Bitcoin tokens, you will need liquidity pools on decentralized exchanges for swapping like other tokens. The red flag is those tokens are not real Bitcoin, they are only tokens on different chains like ERC20, BEP20 and other altcoin blockchains.

Those Wrapped tokens can depeg and lose value like stable coins including algorithmic stablecoin like Terra UST fiasco.

No, the entire bitcoin is not yet in circulation.


By swap, where do you conduct the swap processes? Centralized exchange like Binance? Decentralized Exchange (PancakeSwap, etc.)? or centralized swap platform (Changelly)?

The way of how it works is simply like a currency exchange, suppose X, a currency exchange company between EUR and USD. When you handover your money in EUR, in exchange for USD, X give you the money from their own reserves. So they did not magically hand or create the money out of thin air.

With that in mind, it also applies to many cryptocurrency swap processes.

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Any interaction with a centralized entity is not transparent.

The rest of the total supply is in circulation except for the amount held by the users. You should clear your concept about circulation. When you exchange any coin or token in a market like you convert your BTC to USDT, the market will give you USDT from their hot wallet and deposit your BTC back into their hot wallet. Market has hot wallet for each coin.

In other wallets as well, and these wallets are owned by the exchanges and people just like us. There won't be any liquidity if they're not there and just like us, we contribute to that part. Those tokens or coins that are swapped in exchanges or even in P2P won't just go broken and will be out of the circulation. It is in the circulation and will keep on moving onto other wallets depending on where it has landed. But most likely if it's on the exchanges, it will be traded and until someone gets it and holds it then it will be stopped from there.

Every exchange centralized or decentralized holding a well amount of token in the wallet for this purpose and whenever you swap any token you will get your desires token while your own token goes to their wallet. This is the reason DEX offers liquidity reward for this purpose. You can check this by own experience in the low quality fast exchange like fixedfloat. When you send payment, you can check that address holding all that coin which they offering for swap.

Btc answer is also same, Big amount of btc holding by these exchanges. circulation supply also composed of exchange holding. when we swap, we receive btc from these exchanges and at the same times other user sell btc and whole system works in this way.

For Centralized Exchanges: Swaps is made possible by market makers which simply mean selected/whitelisted entities that provide liquidity on either side of the orderbook.

For Decentralized Exchanges (DEX) : The process is slightly different. Instead of only a few entities being able to provide liquidity, everyone has access to participate and provide liquidity on either side of the order.

User A - > Adds BTC-Usdt to Liquidity pool.
User B - > swaps BTC to USDT (gets USDT provided by user A, user A gets BTC)

That's what happens at a high level.

Why should you be confused, isn't this the same as if you buy a bottle of wine and the seller will hold your money, then the seller spends the money again for other needs.
This is how a currency works and there are transaction activities carried out. The Bitcoin or other coins you exchange will be in the exchange wallet and the coins will also be purchased by other users.