Novation refers to the process of replacing an existing agreement or contract with a new one. In cryptocurrency, this often happens during transactions or when dealing with smart contracts.When a transaction is novated, the original parties may be replaced by new ones, allowing for the transfer of obligations and rights. This is particularly useful in decentralized finance (DeFi) platforms, where assets are frequently traded and the original holders might want to exit their positions without settling the original contract.For example, if a user wants to sell their tokens but the buyer needs to settle the transaction differently, novation enables this by creating a new contract that reflects the arrangement between the new parties. Novation simplifies the process of trading and enhances liquidity, making it easier for users to manage their assets and obligations without the need for complex legal procedures.