To rotate profits from a token on one chain into an asset on another, compare four things: value, fees, price impact, and the amount you will receive. A chain is a separate blockchain network, so moving assets between chains takes more than changing a token in the same wallet. For example, you might want to turn profit held as ETH on Arbitrum into BTC on Bitcoin.
What should you compare before choosing a route?
First decide what you want to own at the end, including the network. ETH on Arbitrum and ETH on Ethereum are versions of the same token on different chains; BTC on Bitcoin is a different asset on its own network.
Then compare the likely cost of the whole route. A direct exchange may require a deposit, a trade, and a withdrawal, while a bridge moves assets between chains and may leave you needing a second trade. thor swap gives you a way to swap across chains in one flow, such as moving from ETH on Arbitrum to BTC on Bitcoin.
Check the estimated output after every cost, rather than comparing headline exchange rates. A cross-chain route can include a source-chain transaction fee, a swap cost, and a destination-chain fee; the amounts change with network activity and available liquidity.
How do you work out what the rotation will cost?
Estimate the final amount you will receive, then compare it with the current value of the asset you are spending. Include network fees, the exchange-rate difference, and price impact—the price change caused by your trade size relative to available buyers and sellers.
For example, say you have $500 of ETH on Arbitrum and want BTC on Bitcoin. If the route estimates $8 in network costs and $3 in price impact, your expected BTC is worth about $489 before any later price movement. Those figures are illustrative; actual costs depend on conditions when you transact.
- Network fee: payment to process a transaction on a blockchain.
- Price impact: how much your trade size moves the quoted price.
- Spread: the gap between the market price and the price offered for your trade.
- Slippage: the difference between the quoted output and the completed output.
Ethereum.org explains that gas—the fee for Ethereum network actions—changes with network demand. THORChain’s documentation explains that swaps through its liquidity pools can have higher price impact when a trade is large compared with pool depth. So a smaller rotation may be cheaper to complete quickly than a large one.
What steps should you take to complete the rotation?
Work through these checks in order, and use the destination amount as your main comparison.
- Name the exact assets and networks. Write down the token and chain you are starting with, then the token and chain you want. This catches the common mistake of choosing the right token on the wrong network.
- Compare complete routes. Check an exchange route and a cross-chain swap route, including all fees and the estimated output. A cross-chain swap service such as thor swap can handle the move and asset exchange together; a separate bridge-and-trade route may mean more steps and fees.
- Check the destination details. Confirm that the receiving wallet can hold the asset on the chosen network. Keep some source-chain funds for the transaction fee, and make sure the destination address belongs to the correct asset and network.
- Review the minimum output and timing. The minimum output is the least amount you agree to receive. If the quote falls below it, a route may fail or return funds; allow for the source transaction to confirm and the destination transaction to complete.
- Start with a small amount if the route is unfamiliar. Confirm that the expected asset arrives on the right chain before moving the rest. Once the rotation is complete, compare the received amount with your estimate and keep a record for your own accounting.
Top comments (0)