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PATHWAY H) Buy it, Sell it, Swap it, Earn it

chapter 3/4

How To Swap Your Crypto Securely Via Ledger Live

Read 7 min
Medium
Ledger devices on a podium
KEY TAKEAWAYS:
— Swap is one of the key ways in which crypto users can exchange their crypto for another asset.

— But swaps – like any transaction – can be a target for scammers. This is where Ledger brings you industry-leading security.

— Swapping through Ledger Live, via a third-party provider, brings you the highest level of security as you exchange your assets: swaps are initiated directly from your Ledger device, with your Trusted Display providing full transparency.

Swapping is one of the most popular features within Ledger Live. 

In this article, we’ll take a deep dive into the mechanics of swapping through Ledger Live via one of our third-party providers. Here, we explain exactly why this is the most secure way to swap.

Different Methods of Swapping Crypto

In the world of crypto, there are literally thousands of coins and tokens to choose from. So what if you need to change one asset for another?

To do this, you have a few different options.

Centralized Exchange

One option is using a centralized crypto exchange. Here, you’ll have access to a wide range of options, but there are also compromises: to swap crypto here, you will need to entrust your funds to a platform wallet, where you don’t control the private keys.

This means you are ultimately not in control of your crypto while it remains in this wallet. If the exchange is hacked, censored or goes bankrupt, you’ll lose your assets.

Decentralized Exchange

Another possibility is using a decentralized exchange, or DEX. Here, you’ll be able to exchange one crypto asset for another, all from the security of your own crypto wallet – where you control the private keys.But again, there is a compromise: DEX protocols are nearly always built on a specific underlying blockchain. This means that users are limited to swapping tokens that share the same blockchain foundation – you could not, for example, swap ETH for BTC. 

So while Decentralized exchanges provide users with more security by enabling you to retain complete control of your private keys as you interact, the options they offer are limited by their underlying network.

Blockchain Bridges

Another way of exchanging one blockchain asset for another on a different blockchain is by using a bridge.

Blockchain bridges are a type of technology that enable users to exchange one coin for another on a different blockchain, without using an exchange. But bridges come with their own problems. To explain their architecture, and the fact that they are still being developed and perfected, makes them vulnerable to hacks. This can be seen in the variety of bridge-based hacks we’ve seen make headlines. The infamous Ronin Hack, which heavily impacted the Axie Infinity community early in 2022, to the Nomad Bridge exploit saw more than $200 million in crypto lost via a malicious attack. And these are just two examples!

Crypto Swaps

Your final option is acquiring the crypto you want via a swap. Crypto swaps are similar to “buying” crypto. Except in this instance, you’re purchasing your desired coins or tokens with another cryptocurrency, instead of with Fiat.

There are some notable advantages to using swaps to acquire different crypto assets. For a start, your range of options is not a function of any particular blockchain. This means you can swap assets from completely different networks.

Then the other advantage of swapping is that you can engage with this interaction directly from your own crypto wallet, offering you the maximum possible security.

Crypto Swaps: Explained

The principle of swapping is simple: services like Changelly are centralized platforms that offer swaps as a service. Let’s say, for example, that you want to swap BTC for ETH. In this case, the platform offers a “rate” for that exchange, including a commission, and sends your crypto from its platform wallet.

To properly understand the process, let’s take a closer look at the mechanics of swapping. Let’s explore how swapping via one of our third-party providers in Ledger Live helps you mitigate your risk.

How Does a Crypto Swap Work?

A crypto swap is a transaction with two parts. One one hand, you have a specific amount of crypto that will leave your wallet and go to the swap provider. On the other side, the swap provider will send you the asset you wanted in return. For example, the provider may offer to swap 0.05 BTC for 0.7 ETH. 

To accept the offer, you, the user, must provide the Ethereum wallet address where you’ll receive the ETH. Additionally, you must also send 0.05 BTC from your BTC blockchain account to the address provided by the swap platform.

But this is where the risky bit comes into play. 

Risks of Swapping Crypto

The two biggest things to watch out for when swapping crypto is the provider and user address. To explain, the provider address  is the blockchain address used by the swap provider. 

Then, the user address (ie your wallet address) is just as important to verify too. If these two addresses are incorrect, you risk sending your precious assets to the wrong person—and potentially even to a hacker. 

These two pieces play a key part of man-in-the-middle attacks.

So how does this type of attack work exactly?

Well, essentially, the hacker changes the sending or receiving address to one of their own, so that they receive the funds. Simultaneously, they will tamper with the display of your wallet interface, so that the transaction appears normal despite the scam. As a result, you confirm the malicious transaction in good faith. 

The result? Either your sending or receiving funds will be lost to the hacker’s wallet. 

Unfortunately, if you’re using a software (hot) wallet to make your swap, there is no way of really knowing that either of these details is accurate. 

Why? Because your digital wallet could have been tampered with via your internet connection, but still show the “correct” transaction details on the screen of your web2 device.

So how can you avoid this type of attack as you swap?

For Maximum Security: Swap Crypto through Ledger Live

The most secure way of swapping your crypto is to use the swap feature within Ledger Live. In short this powerful tool enables you to swap securely through one of our third-party swap providers. Here’s how it works, and why it’s so secure.

Swap via our Trusted Swap Providers in Ledger Live

You’ll initiate your swap through Ledger Live, via one of our third-party swap providers (such as Changelly). Once the quote is shown, you can accept the swap and confirm the transaction. Ledger Live offers several different swap providers, acting as a sort of aggregator for these services. Plus, you can rest assured that when you’re using any swap provider within Ledger Live, you’re definitely accessing the official service . To explain, Ledger Live acts as a secure gateway to apps and services. This guarantees you don’t get stung by phishing sites and unofficial apps.

Benefit From Clear Signing

Another key benefit of using Ledger Live is its clear signing plugin. Firstly, every app within Ledger Live will present you with the proposed outcome of your transaction in human readable language. This helps you to understand the full intent of your transaction before you hit sign.

Plus, initiating a transaction via Ledger Live also means you’ll be able to see full and accurate transaction details on your device’s Trusted Display. There is no other crypto wallet that can offer you this degree of transparency or security during the process. Simpl,y swapping through Ledger Live is the most secure option for exchanging your crypto assets.

Secure Element: Safeguarding Your Transaction From Interference

Ledger devices also benefit from the security of the Secure Element chip. This passport-grade computer chip stores your private keys in an environment isolated from your internet connection, plus the chip itself is completely tamper-proof.

As you know, each time you’re swapping crypto, hackers can intercept the outgoing and incoming transactions. But a hardware wallet signs transactions completely offline, meaning you can’t accidentally reveal your private keys to the internet. Plus, even if someone were to gain physical access to your wallet, a Ledger wallet has never been hacked—which is all thanks to the tamper-proof Secure Element chip.

Signature Verification and Transaction ID Verification

The swap provider will receive this transaction, and will send back their own confirmation—that is also cryptographically signed—along with the corresponding crypto. Secure Element verifies the signature of this incoming transaction to ensure it has actually been fulfilled by the provider.

The ID of the incoming transaction is also checked to make sure it is the same one you agreed to. Only that exact transaction can be executed. In short, changing any of those details would result in a different transaction ID, and the swap wouldn’t be completed.

Swap Crypto Securely Through Ledger Live

There you have it: a choice of swapping options, from the security of your Ledger device.

Crypto transactions can be tricky to grasp, but knowledge is power. Now you understand the mechanics of swapping through Ledger Live, you have the power to make informed choices about how you manage your crypto.

Hackers and scammers love easy targets.  So keep the hackers at bay with the more secure option: swapping through Ledger Live.


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