In 2017 Binance became the first cryptocurrency exchange to hold an ICO, raising $15 million. Consequently, they created a native Binance Coin (BNB). Now BNB ranks #7 by market capitalization, while its price surged from $19.15 to over of $38 as on June 23, 2019, just in a month time, from May to June. Exchanges’ native cryptocurrencies are getting more and more trendy among the platforms — nearly 90 exchanges have their own coins, including Huobi, Kucoin, BTCNEXT, Bibox, and OKEx.
The cryptos themselves show a better performance than simple coins even in a bear market. Is it another short-term hype or something really worth our attention?
In fact, the exchange coin is the same cryptocurrency, though it’s issued not by a project “without at least MVP”, but rather by an already existing and operating exchange. You can buy, sell, and trade these coins. Or you can use them.
Financial rewards and utility
The benefit that an exchange receives with its own cryptocurrency is very much clear — it’s an efficient tool of customer retention. Buying tokens of a specific platform, a user gets literally tied to it and he/she is more likely to become a permanent and loyal client of the exchange. At the same time, customers also benefit significantly.
First of all, traders can speculate on the coin’s price and win profits. It’s well known that the exchange industry is the most money-making sector of the crypto sphere. While the majority of investors suffered from losses in 2018 and early 2019, the exchanges bloomed and earned new millions.
If previously there was no way for a retail investor to win on these huge exchange incomes and get a share of them, then it has become possible — with the advent of native exchange coins. In May 2019, Bitfinex introduced its LEO coin (UNUS SED LEO in full).
Just a month later, it has already reached the TOP-15 cryptocurrencies by capitalization and has risen in price from $1.03 USD to $1.86, obviously satisfying traders, who bought it at the lowest back in May. And newly launched BTCNEXT coin (BNX) leaped by 700% less than in a three-week period, which is unlikely possible for an ordinary cryptocurrency.
What makes exchange coins show such good performance? To a big extent, it’s all thanks to thetoken burning mechanisms and policies. Usually, tokens get burned once a quarter, which allows to forever withdraw the “extra” coins from circulation and sustain the higher price.
Likely it was the burning policy that allowed Binance to be the only cryptocurrency out of the top 10 to post a yearly gain against the dollar in 2018. A similar mechanism is implemented by BTCNEXT with BNX. Quarterly they plan to destroy BNX based on the trading volume until only 50% of all the BNX is left.
Quick buy-sell strategies are not the only option on how a simple user can exploit exchange coins. Unlike conventional cryptocurrencies with often mythical functions and use, exchange cryptocurrency gives utility — it has extensive functionality pool, that is both necessary and appealing to users.
Typically, the exchange coin is used as a payment option for the transaction fees: listing, trading, deposit or withdrawal fees. Paying with these native cryptos is more advantageous customers, as they receive financially rewarding benefits.
For example, Bitfinex offers a 15% discount on commissions. This reduction in the fees is applicable on all the crypto-to-crypto as well as the crypto-to-stablecoin pairs on the crypto exchange. And when using BTCNEXT coin for paying trading fees on the exchange, the BNX owner enjoys a 50% discount on trades.
Beyond fees’ payment
Another feature that many exchange cryptocurrencies can boast of is access to unique services and campaigns that are not available to the non-owners. BNX holders have an opportunity to participate in lotteries, trading competitions and easily join airdrops campaigns, getting free coins deposited to their accounts.
Sometimes exchange tokens can give owners the voting rights and empower them to decide on new coin listings. Such a scheme has already been implemented on Bibox, and is planned to be launched on Coinbene, where users will be able to use their CONI coins for voting.
Rare exchanges also offer exclusive incentives to the owners of their coins — BTCNEXT is among them. It gives BNX holders access to blockchain & trading courses, which can be particularly useful for newbies, tickets to crypto conferences, private meetups, and closed events that are payable with BNX, as well as access to first-rate IEO projects. The latter is another factor of the growing popularity of exchange tokens among traders, as participation in IEOs requires to have a certain amount of exchange cryptocurrency.
Recently BTCNEXT has unveiled its diamond system for angel traders available to customers holding a particular number of BNX for 6 months. The participants of the bonus program, as the BTCNEXT team notes, will be able to take advantage of free premium access to advanced blockchain courses and special events, early opportunity to join IEOs, bigger airdrops, and even a cryptocurrency card.
Clearly enough, there is no surprise that exchange coins are growing in popularity. They are win-win both for traders and for the exchanges as well. The users receive discounts on transaction fees, which is always good for them, privileged access to various campaigns (voting rights, airdrops, IEOs), while the exchange, in turn, receives satisfied customers.