Even though blockchain technology is promising a decentralized future, the reality is that the actual trading of cryptocurrencies remains the most established business on the blockchain. In most historic gold rushes, it has been entrepreneurs supplying the tools and materials that strike it rich. Exchanges and protocols are the current mining picks and sluice boxes of this cryptocurrency gold rush. Let’s take a detailed look at some of the crypto assets that have been benefiting the most from blockchain’s spectacular growth — exchange tokens.
Binance Coin (BNB)
Binance has quickly grown to be the largest crypto exchange in the world with daily volume exceeding $5 billion. As you would guess, Binance’s native token, BNB, has also performed quite well, up over 100x since their ICO. In addition to opportunity for appreciation, BNB also confers various benefits to holders:
- BNB can be used to pay discounted trading fees on the exchange. By paying in BNB (rather than in the currency you are buying), your trading fee is reduced by half from 0.1% to just 0.05%. For anyone doing more than a small amount of trading, this alone makes BNB worth holding. Note that this discount will reduce over time and eventually be phased out
- Binance has promised to use 20% of their quarterly profits to buy and burn (destroy) BNB tokens, reducing the overall supply until 50% of total BNB in existence have been burned. By reducing supply, market prices for BNB should increase over time, assuming demand stays at least constant
- Binance has created their own ICO platform called Launchpad, and typically, the first round of token sales (with the best pricing) are available to those investing using BNB tokens. The ICOs offered to date on Binance (Tron, Bread, Gifto) have been high quality, and sold out in seconds. If the Binance ICO platform grows in 2018, this could add a lot of demand for the BNB token
- Binance has also created over 35 trading pairs for BNB. You can buy NEO, Icon (ICX), IOTA, and numerous other tokens directly with BNB, eliminating the need to convert BNB into Eth or BTC first
- Binance has shared that they eventually have plans to move towards being a decentralized exchange (Dex) and BNB tokens will have additional (but currently unknown) utility on the Dex
Read our Binance Exchange Review
KuCoin Shares (KCS)
KuCoin is also a rapidly expanding exchange, having recently surpassed $250 million in daily trading volume. A few months ago, that would have made them a top 5 exchange in the world! Their native token, KCS, also provides unique benefits to token holders:
- KuCoin offers a revenue split on the trading fees they generate on the exchange platform called KuCoin Shares Bonus. KCS holders receiving 50% of the overall trading fees generated currently, proportional to the number of tokens owned. Although amazing at first glance, there are a few caveats. First, KuCoin is planning to reduce this split from 50% to 15% in March. That is a big drop. Second, KuCoin pays the bonus in all of the tokens they have collected fees for. So, you will receive a small amount of many tokens. With 181 million KCS in existence, the bonus split evenly across them all, and the price per token currently at $10.75 , it will take a sizable investment to hold enough KCS to receive enough of each of the individual tokens
- By holding a specific number of KCS in your account, you can receive a discount in trading fees. KuCoin discounts trading fees by 1% for every 1000 KCS you hold (minimum of 1%). Thus, holding 10,000 KCS would give you a 10% trading fee reduction, reducing their fee from 0.1% to 0.09%. Unlike BNB tokens for Binance, these KCS tokens are not consumed. Given the current prices of KCS, this is more of a side perk for those that are holding KCS for the revenue split
- Like Binance, KuCoin has also added various KCS trading pairs
Read our KuCoin Exchange Review
COSS is the dark horse in this group of centralized exchanges. Their volume is currently miniscule compared to Binance or KuCoin. While COSS has done a nice job of adding many of the most popular new coins, their trading interface in it’s current state is quite terrible and their backend is also laggy. Deposit and withdrawal confirmation times can be glacially slow.
Despite this, COSS might just be the best (albeit riskiest) investment of the three. COSS is well aware of all of these issues and is working rapidly to move out of beta and launch a vastly improved trading interface and exchange backend. If they update and provide traders with a quality user experience, COSS has a lot of room for rapid growth.
COSS also has another trick up their sleeve. Unlike Binance or KuCoin, COSS is working towards integrating fiat currency deposits into their exchange. Once added, COSS will offer USD and Euro (and perhaps other currency) trading pairs. For most new crypto investors, getting fiat into crypto is still the hardest (and most time consuming) step. This is a huge win for COSS if they make it happen.
And if they do, COSS token holders will reap the rewards since COSS also offers a 50% trading fee revenue split. Whereas the KCS split will go down to 15% soon, COSS’ split is permanent as part of a DAO smart contract.
At current prices, approximately 10 COSS can be purchased for the same price as 1 BNB or KCS. Like KCS, the revenue split is paid weekly in the tokens collected by COSS in fees. So, you will need to accumulate a decent holding to receive more than fractional tokens per week (at least until COSS’ volume increases dramatically).
Unlike the other tokens above, BCO represents the native token of a decentralized exchange called CryptoBridge. This Dex is fairly new and very low volume (just recently surpassing $2 million in daily volume). Most of their trading pairs are currently more obscure and lower market cap cryptocurrencies like ALQO, Bitzeny, Footy Cash and FORCE. They do have a few larger cap currencies like Litecoin, Verge and Dogecoin, but trading volume is tiny.
Like KCS and COSS, holding (and staking) BCO tokens entitles you to 50% of the CryptoBridge’s trading fees. Long-term holders can also receive bonuses for staking their tokens for extended periods of time – with bonuses for 1, 6 and 12 months.
0x is not an exchange, but rather a decentralized exchange protocol. 0x is basically building the tools and infrastructure to allow others to build decentralized exchanges. And several groups have jumped on this technology including RadarRelay and Ethfinex (both in beta). Others are also in progress. RadarRelay in particular has started to gain traction with daily trading volume now over $10 million.
Holding ZRX allows users to trade on 0x partners without paying (any additional) fees in most cases. ZRX has the opportunity to appreciate if decentralization of exchanges continues to gain momentum and if other uses for the 0x protocol are realized (like Dharma, which is building a lending app using 0x).
There are several similar tokens that we do not discuss here. Examples include OMG, WAVES and BTS (planned or operational decentralized exchanges), and BNT and KCS (protocols which could supplant or augment exchanges). Others are in development stages or about to launch. The gold rush suppliers themselves are still just getting started…
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