Many of the major cryptocurrency exchanges now offer their own coin or token, allowing users to invest directly in the exchange. Alongside the benefits of investing in a successful venture, these coins also come with a myriad of benefits that users can take advantage of. These proprietary tokens are often less feature-oriented than traditional cryptocurrency, representing a ‘share’ of the company rather than a parcel of computational power or resources.
Their benefits range from discounted transaction fees to direct profit sharing depending on the exchange. While regulatory gray-area makes a traditional stock offering unlikely, exchange tokens offer a happy medium in the interim. Further, exchanges will often use several tactics to buoy the value of their coins – including coin burns, the cryptocurrency world’s equivalent to a stock buy-back.
Binance Coin (BNB)
One of the first major exchange tokens, Binance Coin or BNB is used primarily to discount transaction fees within the exchange. Binance currently offers a 50% reduction in transaction fees for users that choose to pay them in Binance Coin rather than the coin of trade. As all coins are held in the exchange’s wallet, the actual transaction cost is minimal to Binance – leading to their already low transaction prices.
Binance also regularly buys back large sums of BNB for their frequent coin burns. These coin burns serve as a way for Binance to directly increase the value of each individual Binance Coin by reducing the overall supply – which makes them an attractive choice for long term investment. Binance is one of the top global exchanges, and their success over the last year is far beyond that of their competitors. As such, Binance Coin is one of the more attractive exchange tokens.
KuCoin Shares (KCS)
Relative newcomer exchange KuCoin also produces a native token, the KuCoin Share (KCS). Unlike Binance, the coin does not offer discounts – and coin burns are unlikely. Instead, KuCoin Shares offer investors a chance for profit sharing in the company. Similar to a stock that pays dividends, each KuCoin Share pays out a certain fraction per day. While the amount is still small, it has the potential to grow if KuCoin successfully builds their business.
Huobi Token (HT)
One of Asia’s top cryptocurrency exchanges, Huobi serves a different market than both KuCoin and Binance. However, they too have released their own exchange token – the Huobi Token. These tokens are used partially to operate their ‘Premium’ level of service, with discounts similar to those of Binance. However, the Huobi Token is also used to drive the voting process for listing on their Huobi Autonomous Digital Asset Exchange or HADAX. HADAX has minimal oversight and is run almost directly by users voting to add listings. It’s still early in HADAX’s life-cycle, and time will be required to prove success.
A Working, Proven Product
Ultimately, all exchange tokens represent the gold standard for a cryptocurrency; a working product. Where a large share of the cryptocurrency market represents ideas still in construction, this is not true for exchange tokens. Each cryptocurrency exchange is an operational means for users to trade coins and tokens with one another, and this means that exchange tokens are a representation of that ability. So long as the exchange is healthy and growing, their native token will retain value better than the average conceptual cryptocurrency.
Article By: Adam Stone
