There are over two thousand cryptocurrencies - albeit an overwhelming majority have no liquidity and provide zero real-world use case - but what if there was a cryptocurrency that had inherent value via a perpetual buyer?
Introduce Exchange Tokens. A token distributed by the exchange itself, using revenues to buyback tokens and burn them, removing them from the supply forever.
Binance was the first crypto exchange to launch the idea through their native token Binance Coin (BNB) which empowers the entire ecosystem. BNB provides value to the exchange users by allowing them to get a 50% discount on trading fees if they hold BNB in their account.
Coin burning is the process of permanently removing coins from circulation, reducing the total supply. The amount of BNB coins to be burned is based on the number of trades performed on the exchange within 3 months. The BNB burning events are scheduled to take place every quarter until 100,000,000 BNB are finally destroyed, which represents 50% of the total BNB ever issued (200,000,000 BNB).
Binance Coin is up +355% YTD, being one of the only altcoins to outperform bitcoin. Since inception, BNB has posted a staggering +28,740% gain from the Initial Coin Offering two years ago. With the tremendous success that Binance has seen, many competitors have followed suit.
Alameda Research is a leading crypto liquidity provider, posting an average of 5% of global crypto volume across various markets every day. They recently launched their own crypto exchange - FTX. FTX is a cryptocurrency derivatives exchange that offers futures, leveraged tokens, and OTC trading. Currently, futures exchanges have many crippling flaws holding the space back.
Their mission is to solve these problems and move the derivatives space toward becoming institutional grade. They launched FTX in April and already have among the world’s most liquid order books. FTX futures have traded more than $100MM per day recently, and FTX OTC has traded another $30MM.
At the heart of FTX is their native token FTT, which empowers the platform similar to Binance Coin. FTT gives fee rebates to holders using their futures and OTC markets. Also, FTX themselves will be repurchasing and burning tokens equal to:
1) 33% of all fees generated on FTX markets
2) 10% of net additions to the insurance fund ('Socialized Gains')
3) 5% of fees earned from other uses within the FTX platform
FTX started buying and burning FTT every Monday since July 29th, 2019. The purchasing happens on the FTX FTT/USD market at a pre-announced time of day; all tokens purchased are burnt. This type of coin purchase/burn creates a perpetual demand for FTT as long as people are using the platform to trade.
FTT has been live for less than two weeks and is trading +150% from the debut price of $1. When asking the CEO of FTX, Sam Bankman-Fried, what gives FTT an edge over the handful of other exchange tokens, he brought up the following points:
“Really quick growth - already at about 10% of Binance and Houbi's volume and it has only been three months. In the time it has taken Bitfinex and Binance to not quite launch futures, we've launched: perpetuals, quarterlies, spot markets, leveraged tokens, and FTT. Leveraged Tokens let us effectively tokenize FTX futures positions and list them on other platforms, allowing their entire user base to effectively access FTX futures.”
With the cryptocurrency market evolving and gaining steam every day, exchanges are positioned to make consistent returns while staying neutral on price swings. Like selling shovels and jeans during the Gold Rush, exchanges sell the opportunity to speculate on the Digital Gold Rush.
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