An exchange token is a native cryptocurrency for CEXs (Centralized Exchanges). Most exchanges have a native token, however, some of the more popular ones are Binance’s BNB and FTX’s FTT. Other exchange tokens include KuCoin (KCS), Huobi Global (HT) and Crypto.com (CRO).
Exchanges mint these tokens which allow holders to have access to certain benefits such as lower trading fees or discounts.
What Are Exchange Tokens Used For?
Exchanges launch tokens for several reasons. This could be for customer incentives through staking, transaction cost purposes, raising capital or for governance.
For instance, in Binance, the BNB token is used as a governance token for the BNB Chain.
In KuCoin, token holders are entitled to special discounts on trading fees or other costs associated with the exchange. The more KCS tokens the holder has, the better the discounts.
The token holders can also use it to pay transaction fees.
With Crypto.com, CRO token holders are entitled to rewards tied to their newly launched credit card. This would allow lower trading fees, lending rewards and discounts.
As for the exchanges, having your own native token helps establish liquidity within the exchange.
Exchanges do this through staking.
If a user has a DOT token that they decide to stake, a CEX (Centralized Exchange) would reward them with their exchange token as reward for providing liquidity.
Final Thoughts on Exchange Tokens
It’s important to do diligence as risks are always involved before you invest. The crash of FTX is an example of why, which was initially considered a trusted player in the cryptocurrency industry. They were a trusted exchange with millions of users trading daily on their platform.
However, one incident with a rival exchange caused the downfall of the exchange and along with it, the crash of their native token, FTT.
So, if you’re looking to hold an exchange token, look into the registration and operation of the exchange before making the plunge.
Curious about which exchange tokens are out there? Check the full list on Coinranking.