Crypto

Why do Cryptocurrency Exchanges Have Their Own Tokens?

Typically, exchanges launch their own coins via an ICO (Initial Coin Offering), in which the tokens that are sold are changed to...

Written by Niel Patel · 2 min read >
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For various reasons, a cryptocurrency exchange launches its own token, and cryptocurrency owners frequently provide tokens to customers as incentives. Generally speaking, most exchange tokens are created to improve the liquidity of an exchange, encourage trading, or simplify the community governance process of exchange.

Let’s understand the reasons for the launch of native tokens by crypto exchanges.

Exchange tokens have not been new in the world of cryptocurrencies for a long time. Such assets are native to individual cryptocurrency exchanges and are introduced to provide certain benefits that help facilitate trading activities on the respective centralized and decentralized platforms. Learn bitcoin360ai to trade as a professional. 

According to crypto data aggregator CoinGecko, which tracks nearly 200 of them, the total market capitalization of assets native to exchanges is about $77 billion as of August 2, 2022.

So, for those who are wondering what exchange tokens are (even though they have now somewhat become an integral part of the portfolio of many crypto traders), we offer you three main points about their existence:

Since exchanges follow a competitive business model where everyone always strives to maintain user loyalty, exchanges have introduced their tokens to manage their own exchange activities easily. Thus, the first major use case for these tokens is to service the ecosystem of exchanges to pay for services and, with strong fundamentals, to insure against market downtrends. These tokens are designed to provide various bonuses and benefits for using the exchange’s tools and products — a kind of incentive for its users — and its own tokens provide additional value to those who own them in the form of privileges and discounts on trading fees.

Most Popular NFT Tokens

Crypto exchanges are a form of business that facilitates the trading (buying and selling) of crypto assets. They achieve this basic proposition by combining the base currency with the quote currency in their listings. Exchanges also store digital assets for their users, which has prompted exchange operators to develop several products, including ones that could help leverage idle assets while allowing owners to generate a passive income (like staking). However, to facilitate operations in the face of increased activity on exchanges, given that they will not have strong control over third-party tokens listed on their platforms, proprietary exchange tokens help reduce the burden of receiving rewards and other requests.

From another perspective, exchange tokens offer their trading platforms a convenient way to increase liquidity. Exchanges must be liquid to buy or sell a digital asset quickly. This ability allows exchanges, especially those that register huge trading volumes, to operate without interruption, providing users with a constant flow of transactions. Liquidity is related to reliability. Exchange users want to rely on a trading platform with the infrastructure to meet their liquidity needs at all times with uninterrupted operation, including during extreme peaks of trading activity.

They don’t necessarily need them – it’s true.

But exchanges create tokens for 3 reasons:

  1. In exchange, you can make money speculating them.
  2. This is to enable trade on the platform.
  3. They’re good for marketing in the crypto world. When certain coin skyrockets, everyone writes about it.
  4. They’re good for boosting customer loyalty. Once you hold some change tokens, you become an ambassador, and it’s highly likely that you’ll tell that to your friend and make good arguments for it.

Exchange tokens with a low capitalization, such as $PROB

There are various exchange tokens, including those with low capitalization. Low limits are those that fall below $1 billion in total value. They have what it takes to fluctuate in price dynamics at any time, and with the potential to increase in value in a very short period of time.

ProBit Global’s $PROB falls into this category. As you may know, the exchange supports new blockchain projects on their way to conquering the world and remains the main gateway for launching altcoins with good potential to attract investors and gain publicity and relevance. ProBit Global has until now offered incentives using its ecosystem’s native asset, $PROB.

Why do some cryptocurrency exchanges have their own native coins?

Typically, exchanges launch their own coins via an ICO (Initial Coin Offering), in which the tokens sold are changed to the exchange’s native coins. This is actually a method for them to make some money off of their services (mining, transfer etc.). Typically, these tokens provide companies with free capital upfront to develop their exchange services and other services, giving them free investable assets. As native coins are made available for trading, token buyers will receive them in return. Exchanges will also get an advantage in the market for their own cryptocurrency through ICOs. If customers buy their tokens first, that is.

Why do crypto exchanges have their own coin?

Tokens, known as exchange coins, are produced by cryptocurrency exchanges. Exchanges emerged as a simpler way to purchase, sell, and exchange these assets by emulating the traditional finance experience to promote the use of cryptocurrencies.

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