Exchanges are essential to trading your assets as a crypto trader or investor because they act as a gateway to trading cryptocurrency. As a result, exchanges assumed responsibility for connecting buyers and sellers. Moreover, crypto trades would be impossible and inefficient without a medium to facilitate the trade. However, cryptocurrency exchanges typically charge a fee for each transaction as payment for their services to conduct this trade. This is mainly done by the exchange-owned token, referred to as an exchange token.
What is an Exchange Token?
An exchange token is a digital asset unique to a specific cryptocurrency exchange. These tokens are native to their parent exchange and are primarily used to fund the platform. Exchange tokens are intended to increase exchange liquidity by assisting exchanges in maintaining and improving the platform's infrastructure. However, exchange tokens offer plenty of utility to users, including voting rights, reduced transaction fees, and exclusive coin offerings. They also enhance marketing value, serve as a catalyst for the exchange's continuance, and draw a lot of potential users to the platform.
Use Case Of Exchange Token
Exchange tokens primarily function to keep the platform ecosystem of the exchanges. As such, they are regarded as utility tokens since they are used majorly for trade purposes and payment of fees. As a result, exchange tokens are utility tokens that ensure the platform's viability without necessarily performing a business investment function.
Exchange platforms use exchange tokens for different purposes -buying products and services, staking, etc.- but their primary use case is to serve as a payment token to keep the platform running. Among other use cases are:
Provide Liquidity
The number of trading activities performed on an exchange at any given time is called liquidity. Therefore, crypto exchanges use their token to incentivize users to bring more trades to the platform, providing more liquidity. These tokens are made available to users depending on the volume of their trades. They allow markets with high levels of liquidity to function and assets to be traded easily without suffering significant price changes. Exchange users are rewarded with exchange tokens in proportion to their overall trading volume for increased productivity.
Fees Discount
Most cryptocurrency exchanges that support tokens are custodial, and as a result, they typically charge their users a small fee when they place or execute an order on the platform. The cryptocurrency exchange offers discounts on transaction fees, including deposit fees, withdrawal fees, and other exchange fees, to encourage users to trade more on the platform. However, most exchange fee discounts have different terms and conditions. For example, one of them typically requires users to have a specific proportion of the exchange token in their wallets to take advantage of the discount. As a result, users are inspired to invest in the exchange token to gain more immediate and long-term benefits, which raises the exchange token's demand.
Governance
Even though the primary purpose of an exchange token is to serve as a utility token for platform users, several crypto exchanges have distributed native tokens intended to serve as a governance mechanism for the exchange's future development. As a result, users of the exchange token have exclusive privileges and voting rights over the exchange's development. However, this use case is more familiar with decentralized exchanges aiming to transition into fully community-run operations rather than centralized ones.
How Exchange Token is Distributed
An Initial Exchange Offering (IEO) is how most exchange tokens are distributed. The exchange's participants receive the tokens and are immediately listed on the exchange. Exchange tokens can also be distributed via an airdrop, a marketing tactic to draw in more users in the cryptocurrency industry. Similar to the airdrop, users may receive tokens for quickly completing tasks like mentioning the exchange on social media and referring users to the platform. In some cases, however, users may receive tokens for nothing at all.
An exchange token can be traded and exchanged just like any other cryptocurrency once it has been distributed through an airdrop or sold through an IEO. However, the primary purpose of exchange tokens is to facilitate the platform's services.
Benefits of Exchange Tokens to Users
The main benefit of exchange tokens is that they lower the cost of services for users by giving discounts on trading, deposits, and withdrawal fees.
Users can exclusively participate in the platform product and services, especially contests and airdrops.
Exchange tokens give an exclusive right to users for governance purposes to participate in and influence the development of the exchange.
Users also profit from personalized investment advice, interest payments, leverage in derivative trading, and improved customer service.
Top Exchange Tokens
There are several exchange tokens in the market, many of which belong to the biggest names in the cryptocurrency industry. Here are the top exchange tokens according to their coinmarketcap rankings;
Binance Coin (BNB): BNB is the native coin of the Binance exchange. It is considered one of the top exchanges in terms of the trading volume.
UNUS SED LEO: LEO is a utility token utilized across the iFinex ecosystem. Using the token allows its users to reduce their trading costs. However, the discount depends on how much LEO the user has in their account.
FTX Token (FTT): FTX is unique because of features like universal stablecoin settlement, a centralized collateral pool, and clawback prevention. FTX is a leverage token for its users, allowing them to trade without the need for margin.
Cronos (CRO): Cronos (CRO) is the native cryptocurrency token of the Cronos Chain, a decentralized, open-source blockchain. Cronos is a utility token used for exchange-based transactions.OKB: OKB is the OKEx utility token that allows users to access the cryptocurrency exchange's unique features. It is also used to set and pay trading commissions, grant users access to platform voting and governance, and compensate users who hold OKB tokens.
Where to Get Exchange Tokens?
Exchange tokens are exclusive to the platform they serve. However, exchange tokens can be purchased from any exchange that has listed them on its platform.
While there are several crypto exchanges where you may buy exchange tokens, Cwallet is an interactive cryptocurrency wallet that can be used to buy, sell, and swap all your exchange-based tokens. It has numerous features, such as storing your coins, swapping, tipping, airdrops, and earning money on the go while also supporting the crypto-economy via social networking. In addition, you can swap tokens between 800+ cryptocurrencies present on Cwallet. Whether performing a cross-chain swap or an "on-chain swap," Cwallet offers the lowest possible transaction fees. In addition, you can swap various currencies within your wallet for absolutely free!
What's more?
Cwallet is a unique cryptocurrency wallet that combines custodial and non-custodial features. With the help of this combined on-chain and off-chain wallet, you can manage and trade over 800 cryptocurrencies in a single spot, providing security, simplicity, and flexibility.
Cwallet does not charge any deposits, withdrawals, and token swap fees. Therefore, using Cwallet is absolutely FREE!
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