What are Exchange Tokens?
Exchange tokens are essentially utility tokens and have been issued by some cryptocurrency exchanges since 2017. Exchange tokens are a growing class of digital tokens and have the underlying credibility of being issued by genuine infrastructure projects and existing companies. There are 4 exchange tokens in the top 20 cryptocurrencies (by market cap), with Binance Coin in the top 10.
What are exchange tokens used for?
Exchange tokens are issued for the benefit of the users of an exchange. These tokens are designed to provide a number of advantages to the token holders, most commonly to reward market makers who create liquidity in the exchange and to lower trading fees for users. Some provide exchange users with limited governance rights and airdrops. Often the benefits to the holder of a token are linked to the amount of tokens they hold – larger balances accrue increased benefits.
How does a token work?
Exchange tokens are essentially the loyalty and reward programme of the issuing exchange. Some observers have compared them to air miles. The difference however is that exchange tokens can be traded on a number of different exchanges and are viewed not only as utility tokens, but also as investments. Some exchanges apply varying strategies to boost the price of their indigenous exchange tokens; the most common of these is token buy-back. Exchanges commit a proportion of their commission revenue or profits to buy back the tokens from users and then to burn them, thereby decreasing the circulating supply. Both Binance and Kucoin have promised to reduce supply of their exchange tokens from 200 million to 100 million via their buy-back programmes.
What's the difference between a token and a coin?
Crypto tokens are a type of cryptocurrency that represent an asset with a specific use on its native platform. Tokens are commonly created on existing blockchains. Tokens are designed with utility in mind, providing access to and use of a larger crypto-economic system. Most tokens exist to be used with decentralised applications, or dApps. Tokens are not designed to act as a store of value in their own right, but rather are designed to function with the software developed alongside. For example, ERC-20 tokens are designed to function on the Ethereum system and blockchain.
A digital coin, on the other hand, is an asset that is native to its own proprietary blockchain. The best known examples are Bitcoin, Ether and Litecoin. Digital coins are generally used as a means of transferring value between counter-parties, just like fiat money. They are not designed to serve any other purpose, though they do have other valuable attributes, such as transaction speed, security, anonymity and low transaction costs.
Binance Coin (BNB)
- Binance Coin (BNB) is a digital currency issued by Binance, the world’s largest cryptocurrency exchange.
- BNB is based on the Ethereum blockchain and similar to Ether.
- The Binance Coin token fuels all operations on Binance.com and fees paid in BNB on the exchange receive a discount. These fees include trading, exchange and listing fees.
- BNB is also be traded on supported cryptocurrency exchanges.
UNUS SED LEO (LEO)
- UNUS SED LEO is a new (May 2019) token, created to expand the capabilities of all users of the iFinex platform and services, including the Bitfinex exchange.
- The token is designed to address the crisis that arose after Bitfinex was accused by the New York prosecutor’s office of illegally using the Tether cryptocurrency.
- There are three main functions of the coin: replenishing the Bitfinex budget; expanding opportunities for servicing customers; and iFinex ecosystem development.
- As with Binance Coin (BNB), LEO acts as the internal coin of the Bitfinex exchange.
Huobi Token (HT)
- Huobi is a Singapore-based cryptocurrency exchange launched in 2013. Huobi is one of the largest cryptocurrency exchanges in the world.
- Huobi Token (HT) is its proprietary cryptocurrency and was created in January 2018 to reward Huobi exchange users with lowered fees for using HT. Benefits include discounted trading fees, margin discounts and access to certain trading events.
- Huobi has committed to using 20% of exchange revenues every quarter to buy HT in the open market and subsequently burn them to reduce the total supply in circulation.
- Huobi is said to have modelled much of HT’s features and benefits on the Binance model, which created the BNB token.
- OKB is the indigenous token of the OKEx exchange and provides users with
- discounts on trading fees, access to the OK Jumpstart initial exchange offering (IEO) platform and voting rights for tokens to be listed on the exchange.
- Going forward, OKB will be used to pay transaction fees on the OKChain blockchain as well as decentralised exchange OKDEX.
- OKB is an ERC-20 token on the ETH network and as the global utility token issued by OK Blockchain Foundation, is the bridge connecting the OKEx trading platform and its users.
- OKB is an absolute deflation token, with a total supply of 300 million. 30% of the OKEx spot market transaction fee income is used to buy back OKB from the 300 million circulating supply on the secondary market quarterly. In this way, all OKB supporters will gain benefits from the value increase brought about by circulation deflation.
FTX Token (FTT)
- FTX Token (FTT) is the native crypto token of the FTX ecosystem. FTX tokens are ERC20 running on top of the Ethereum network.
- FTX is a cryptocurrency derivatives exchange that specialisesd in over-the-counter (OTC) trading, providing futures and leveraged tokens. FTX was launched in 2019 and is supported by Alameda Research, a trading company and cryptocurrency liquidity provider with almost $100 million in assets and trading up to $1 billion per day (roughly 5% of global volume).
- As the utility token of FTX, FTT holders receive benefits on the FTX exchange, including: lower trading fees, burning of fees, OTC rebates, collateral for futures trading and socialised gains from the insurance fund. FTX has carefully designed the incentive schemes to increase network effects and demand for FTT, and to decrease its circulating supply.
- FTT token has become increasingly popular amongst crypto traders and investors, however note that FTX Token (FTT) is not available in the United States or other prohibited jurisdictions. If you are located in, incorporated or otherwise established in, or a resident of the United States of America, you are not permitted to transact in FTT.
KuCoin Shares (KCS)
- KuCoin Shares (KCS) is the proprietary ERC-20 token for the KuCoin crypto asset exchange and is only tradeable on the KuCoin platform.
- KuCoin is an international cryptocurrency exchange based out of Hong Kong that currently supports the trading of over 200 digital assets. KuCoin Shares allow holders to profit from the success of the exchange. KuCoin is unique in that they share 50% of their overall trading fee revenue with users who hold KCS tokens. In a similar fashion to Binance, KuCoin offers lower trading fees and incentives for holding or trading its native cryptocurrency. KuCoin takes into account the amount of KCS users hold when distributing the various coins. The more KCS you hold, the more dividends you’ll receive.
- KuCoin’s payout system enables users to receive passive income by HODLing. However, whilst the company currently distributes 50% of trading fee revenue with users, the percentage paid to KCS holders from these trading fees is likely to reduce in future.
Crypto.com Coin (CRO)
- Crypto.com Chain is a project launched by Hong Kong-based payment and cryptocurrency platform Crypto.com. The CRO token enables cross-asset intermediary currency settlement for the native Crypto.com Chain. It's available on 22 exchanges globally.
- CRO is its proprietary cryptocurrency, designed to allow users to make cryptocurrency payments to as many globally available merchants as possible. This is achieved by making CRO an intermediary currency, which will allow for the conversion of cryptocurrencies to their fiat counterparts at much reduced cost.
- Crypto.com Chain wants to get rid of the traditional fiat payment structures which are not friendly to innovative payment methods such as cryptocurrencies.
- Crypto.com believes traditional payment platforms are resistant to change, such as the easy introduction of new currencies and removal of strict rules which are imposed on merchants.
- Holders of CRO enjoy discounted fees, higher earnings, priority token allocations and other benefits on the Crypto.com Exchange.
- In August 2020, Crypto.com announced the merging of the MCO and CRO tokens. The move spelled the end of the MCO token, moving all functionality to CRO. The Crypto.com Visa Cards will now be powered with CRO staking. Holders of MCO have been required to swap their MCO tokens to CRO on the Crypto.com platform.
- Crypto.com was formerly known as Monaco and the platform was built as an ecosystem of varied blockchain-powered products, all developed and marketed under the MCO brand. This range of products includes: the crypto Visa card, a mobile wallet app, Crypto Invest services and the CRO token.
- Visa prepaid cards are the flagship products offered by Crypto.com. Cardholders must meet certain CRO staking thresholds to access higher card levels. The cards provide users with the ability to buy, sell, trade and spend crypto in parallel with fiat currencies, earning varying levels of cash back.