The transformation of the exchange token from a source of liquidity into a profit vehicle
Since the massive ICO rush several years ago, both the exchange token and the native token are now more common than ever. The exchange token was originally designed to provide traders and users with instant liquidity. However, they are now major tokens. For example, BNB is even outcompeting normal cryptocurrencies. To put this into perspective, BNB is currently among the top 10 tokens by market capitalization.
Why is the exchange token so important?
Just like their counterparts, the native tokens, exchange tokens are minted to be used for trading. In general, they serve three main roles:
- Governance
- Form of payment
- Liquidity
Arguably, the major role of the exchange token is liquidity, though other tokens still contribute to liquidity. Even so, the crypto exchange is different from traditional exchanges. That’s because typical exchanges are traded against a common fiat currency like the USD. On the other hand, crypto exchanges support several trading pairs.
Nowadays, there are tons of virtual tokens and coins online. As a result, most exchanges are overwhelmed when deciding the type of trading assets to provide. When there is no common base, users find it hard to trade their assets. This is a major setback for all exchanges. On the other hand, establishing a local token makes it easy for all exchanges to support the trading of coins and tokens against it.
Similarly, you can leverage an exchange token as a form of payment. Users often receive huge trading fee discounts as an encouragement to use the token from the exchange. These discounts are useful incentives when exchanges want to encourage trading on their sites.
Exchange tokens also offer more benefits beyond what we’ve discussed above. By using the exchange tokens during trading, you gain the right to participate in the token upgrades. That means you can vote or have a say in the platform’s future. However, this advantage is limited to decentralized exchanges (DEXs).
How is blockchain evolution affecting exchange token evolution?
To understand this, you should start by looking for a few major exchange tokens in the blockchain space. You will realize that some of them actually out-compete major cryptocurrencies from a growth perspective. This dramatic increase in value is partly driven by people’s reluctance to spend their tokens. For instance, many people would rather hold onto BNB instead of using it for trade.
What’s the main driver of this value increase? Let’s consider this from a wider perspective. Today, the major crypto exchanges are the complete opposite of what you would expect them to be. You will find centralized trading channels trading decentralized assets. Hardly any platform is strategically making a move to launch its decentralized exchange to close the gap in the market.
This is because existing tokens can be used as the native token alternative. In other words, tokens are not just an exchange tool anymore. Instead, a token offers utility and plays a similar role as that which Ethereum gas plays.
Certain exchanges like BNB are advancing to the next level. Besides offering a Binance chain and decentralized exchange, it has DeFi features and a smart contract that powers BNB smart chain. Before the economic downturn and the crypto market slowdown, we saw several different projects being unveiled on Binance. As a result, of this explosion of projects, exchanges like BNB have experienced dramatic growth.
Other similar exchanges experiencing massive growth include OKEx’s OKB. However, its growth rate doesn’t match that of Binance. OKB is driven by the community and comes with NFT and DeFi capabilities. These two factors combine to play a vital role in the OKB price increase.
The importance of building trust for exchange tokens
It’s no secret that the blockchain industry runs on trust. Earn the community’s trust, and you’re bound to succeed and see wide adoption of your assets. On the other extreme, if you lose the trust of the community, they’ll be quick to pull their money out and invest in the next project with potential.
How do you earn trust in these crypto communities?
One surefire way to earn trust in this industry is by producing educational content consistently. Once community members start relying on you to educate them, they’re more likely to invest in your project. Another way to earn credibility for your project is through community engagement. Interacting with community members is a good way to ensure they feel appreciated for their loyalty. Finally, you can expand the visibility and trust that your project has by partnering with crypto influencers who have engaged audiences.
The future of exchange tokens
Thanks to the growing demand from crypto enthusiasts, more opportunities and applications are being created for exchange tokens. As project developers launch new blockchain solutions on their platforms, crypto investors can now use exchange tokens in many ways.
Due to these solutions, the global adoption of exchange tokens is expected to be immense. At the same time, this adoption creates a loop that contributes to the rising value of these tokens. Today, exchange users often hold their tokens instead of using them to trade. That’s because of their incredible rise in value. Thanks to this increase in value, the supply and demand curve gets affected. The tokens achieve a higher value, thus instead of serving as trading tools, they are now potential investments.
Conclusion
Blockchain technology was first introduced to the world in 2008 as the distributed ledger that powered bitcoin transactions. Despite the technology now being more than 14 years old, the technology is still relatively new to many people. At the same time, this industry is reporting astounding growth figures. Even at the height of the COVID-19 pandemic, industry experts estimated that global spending on blockchain projects would reach $11.7 billion by the end of 2022. At the moment, despite the Russian invasion of Ukraine and the impending recession, experts estimate that industry spending will reach $20 billion by 2024.
As more people adopt blockchain technology and make use of its applications, exchange token adoption will also increase. As a result, we’re bound to see a continued increase in the value of exchange tokens in the coming years. Simultaneously, we won’t be surprised if blockchain developers create new functionalities for the exchange token as we know it today.
As we head into 2023, the exchange token already has greater potential as an investment than actual cryptocurrencies. Thanks to this potential, token holders would rather hang onto their tokens than spend them. This is what industry experts call holding on for dear life – HODLing).
The rapid rise in the value of exchange tokens is one of the major drivers behind this trend of HODLing tokens. As more people adopt and HODL these tokens, the tokens also have more potential going forward.
How Pressfarm can help blockchain developers who are launching an exchange token
Partnering with a PR agency to promote your exchange token as you launch can do wonders for your project. After all, PR experts such as those at Pressfarm have what it takes to earn the trust you need for a successful token launch.
For starters, with a PR package from Pressfarm, you can get a professionally-written press release that will help your brand shine. In addition to writing professional press releases, Pressfarm’s team of PR specialists, expert writers and certified designers can also develop winning guest posts and eye-catching press kits for your brand.
Pressfarm can also help you distribute this content widely, hence putting it in front of the right eyes. By submitting your content to the right startup directories and media outlets, Pressfarm can boost your online visibility. This strategy also ensures ensure your project ranks in relevant search results across different search engines.
Moreover, Pressfarm’s media database contains over 1 million journalists across different industries. This allows you to keep generating publicity for your brand long after Pressfarm has wrapped your campaign up. With any of Pressfarm’s PR packages, you can put your project in the spotlight where it belongs.
FAQs
Why should an exchange launch native tokens?
- It creates crowdfunding opportunities they can leverage for launching and building their platforms.
- Some exchanges have created blockchains based on their native tokens. This allows users to participate in staking, yield farming, and governance votes. It’s also an additional utility, especially with fee payments.
- It encourages traders to leverage the exchanges for trading. More importantly, it allows the exchange to preserve liquidity. They are even offering incentives to ensure users are adopting their tokens. These include airdrops, bounty campaigns, massive discounts, and referral commissions, among others.