Native exchange tokens take on a more prominent role in crypto innovation
Mounting fears over the spreading coronavirus has triggered a huge wave of selloffs across markets and asset classes. While global insecurities in the past have often had mild effects on the price of Bitcoin, this time around BTC dropped 26%, printing the biggest red candle in seven years.
The drop has somewhat undermined the narrative that Bitcoin acts as a safe haven similar to traditional assets like government bonds and gold. However, it should be noted that gold prices have seen sharp drops as well and we can really only test rest this investment narrative once we can compare how these markets recover over time.
If anything, now is a good time to draw more attention to the utility of various crypto assets. Alongside DeFi applications, payment-oriented currencies, and privacy coins, we see native exchange tokens in particular as taking on a more prominent position in the industry in the coming year.
Exchange tokens are valuable tools for both traders and platforms
In 2019, more exchanges made their own native tokens available for trading with Binance, Huobi, KuCoin, BiBox, FTX Token, and others all joining the fray. Exchange tokens are typically used to incentivize market markers to kickstart liquidity, pay for fees when executing buy and sell orders, or to power certain operations such as community voting for new coin listings. By only granting token holders access to trading discounts and certain activities like initial exchange offerings (IEOs), crypto exchanges have largely been successful in driving uptake of their native tokens and thereby creating a new revenue stream.
While there are slight differences in terms of how some of these tokens can be used on their respective exchanges, they do have one thing in common – their value is tied to market activity, bear or bull. Near the end of 2019, the only notable tokens that outperformed BTC (148%) for the year were exchange tokens BTMX (394%), OKB (358%), HT (247%), BNB (235%) and KCS (138%).
Exchange tokens allow crypto exchanges to strengthen their business models, differentiate themselves, offer their customers exclusive benefits and, by doing so, build customer loyalty with a real sense of community. And while the IEO game has slowed down, native exchange tokens will continue to play an important role as exchanges diversify their offering in a bid to attract more trading activity and draw in newcomers who are only just beginning their crypto journey.
Crypto exchanges are driving innovation
By expanding the utility of exchange tokens, crypto exchanges are taking on a more important role. Rather than just being the on- and off-ramp for traders, exchanges are actively shaping the value proposition of the crypto industry at large. They have already done important work around market infrastructure and channeling capital into the industry, but now, as we approach the emergence of more diverse crypto markets, crossover markets and alternative forms of engaging global finance, exchanges are stepping up their game even further.
We see huge potential in tokenization giving way to a full spectrum of digital assets enabling investors to trade crypto against commodities such as oil, gold, silver, coffee, wheat and so on. The type of growth we are talking about should not be underestimated. Crypto’s $800 billion dollar market cap at the end of 2017 was certainly impressive, but it’s nothing compared to what’s possible when we further connect crypto to traditional markets. Imagine what happens once we really start tapping into the $8 trillion dollar gold market, or the world’s $80 trillion dollar stock markets.
Connecting crypto to global finance with AAB
In anticipation of a maturing and expanding crypto market, we are rolling out a set of unique financial instruments focused on tokenized commodities, perpetual contracts, options, indices, altcoins, social trading and security tokens. The goal is not just to develop new ways of engaging the crypto markets, but also to integrate crypto with traditional markets.
Our own exchange token AAB is the key to gaining access to these markets on AAX Exchange. It is designed to be a bridge between digital and traditional assets, retail and professional traders, takers and market makers, the exchange and its partners. A total of 50 million AAB will be gradually released to the market, with 20% made available for public sale in a series of discounted flash sale rounds. AAB can be used to settle trading fees at a discount, make lending/borrowing even more attractive, and to unlock exclusive services.
The AAB exchange token is deeply integrated with our upcoming product expansion. It provides special trading benefits to our customers and it provides our community with the means to be part of the growth of the exchange. We like to think of AAB as digital umami – it adds that extra touch, that next-level flavor, that hard-to-define dimension – the missing piece that makes everything taste slightly better.
Read our whitepaper for more information about the AAB token and how it relates to the new financial instruments coming out this year on AAX.
Launched in November 2019, AAX is the first cryptocurrency exchange to be powered by the London Stock Exchange Group’s technology provider LSEG Technology. It Is also the first cryptocurrency exchange that joined the London Stock Exchange Group’s Partner Platform, providing institutional clients ease of access to the crypto market. Offering OTC, Spot, and Futures trading, quoting more than 50 cryptocurrency pairs and listing 5 perpetual futures contracts for Bitcoin, Ether, Litecoin, Ripple, and EOS, which can be traded with up to 100x leverage, AAX provides a secure, deeply liquid, ultra-low latency and fully compliant trading platform. Check out here for more.