Exchange Coins: Why This Unique Type of Asset Will Keep Crypto Alive in the Years to Come
28 June, 2018 | 5 MIN
Exchange coins are assets that have fuelled both the creation of a new breed of crypto exchange, and helped with liquidity and price discovery. Binance, KuCoin, Huobi are the most prominent examples of a native exchange-linked coin. DAC is next.
Trading crypto coins can be lucrative. But what do you trade them against? The most intuitive answer is — fiat currency, value that everyone understands. But there is a problem with using fiat to value crypto coins — we still don’t know what the fair value of crypto coins is, and the cycles of frenzy and despair see the market spike and crash dramatically. The volatility in the market means it can be an emotionally taxing experience to see the dollar value of your crypto assets soar — or plunge, often within hours.
Then there are those who have traded crypto-only pairs. In the fall of 2017 and in the months after that, more and more people realised that using fiat to achieve crypto gains was the most cumbersome approach possible. Consider the time delay for a bank transfer — three, even five business days in some cases. The restrictions that applied to moving funds, or accepting fiat currency, as well as expensive registration requirements created the new model of a crypto-only exchange.
Exchanges like Poloniex and Bittrex adapted first, switching from accepting dollars to using a curious new asset — the Tether digital currency, or USDT. Other exchanges, like BCEX, created CK USD, another fixed-price coin. There are other dollar-pegged currencies emerging all the time, including the DAI, and TrueUSD, or TUSD. There are no limitations to moving funds in the form of crypto coins — they are free, borderless, and trustless. Arbitration becomes possible, switching exchanges is easier.
Native Exchange Coins
But there is another way to bring liquidity to the market — a native coin for every exchange. Binance is one of the most prominent examples, and its token was so successful, the exchange now plans to move it to a new blockchain, instead of Ethereum. Binance Coin, or BNB, started trading below $1, and has gone as high as $20. At the moment, as Bitcoin slides, a lot of buyers are parking their funds in BNB. They hope a price recovery will see them end up with more Bitcoins. Trading against BNB has caused some excitement — and it is not the only option.
Huobi Token, or HT, rallied briefly above $5, and near ATH levels in Bitcoin prices, repeating the pattern of BNB. KuCoin Shares have also reflected the success of KuCoin, a very dynamic exchange that lists new in demand digital assets.
Of course, Bitcoin will probably always be exchangeable for cash, if not other valuable assets. But those specialised coins, tokens, and dollar-pegged digital assets are instrumental in further building out the wider crypto ecosystem.
Taken together, Binance Coin and Huobi Token make up daily volumes of about $150 million — nothing to sneeze at. Tethers see about $2.5 billions in trading, and a handful of other exchange assets take a significant portion of the market.
There are skeptics who see this form of exchange as misleading, since no actual cash changes hands. However, the world of crypto coins is slowly beginning to build its own internal value, based not on speculation, but on the useability of tokens. And while Bitcoin may always remain the settlement coin, exchange coins will be instrumental in trading the newly emerging coins with different uses and qualities.
How Exchange Coins Stack Up
Exchange coins and tokens have been created with varying qualities, to suit the trading profile and goals of various markets. Here is a brief breakdown of these digital assets, to compare their varying profiles:
All of the features may vary, but those coins are relatively scarce compared to other assets. In the case of Binance, the supply is fluctuating with coin burns, a form of profit distribution.
What Makes Exchange Coins Valuable
And then there is the best quality of exchange coins: the more they are used, the more valuable they become. They have a clear use case and are always in turnover. Even in a bear market, exchange coins are very robust because they are there to fuel trading in either direction. In the latest market downturn, a lot of traders decided not to attempt selling their coins for fiat, but instead to wait it out, while finding some safe havens in the world of crypto coins.
The more trading there is, the more “alive” the world of crypto assets becomes. In the past, exchanges usually adopted pairs with Bitcoin, and soon after that, with Ethereum. But those assets were too vulnerable to unpredictable fluctuations. After the creation of exchange-specific coins, those assets could be tailored to the needs of the trading platform — in just the right number and decimal points for intuitive pricing. Thus, a native exchange coin is much easier to control. There are no unknown price factors, and the technology is also tightly controlled, so there are no surprises.
This is the chief reason why Dacxi chose to create the native DAC coin, an asset that will become one of the building blocks of trading on the Dacxi Exchange and a vital part of the wider Dacxi ecosystem. A dedicated digital coin, its value will rise with the development of the project and its real-world performance.
Exchange coins also help to achieve lower trading fees, and sometimes serve to build a bonus and returns system. Binance strengthens its community with its regular coin burn — a way to distribute part of the trading gains to BNB holders. The possibility that an exchange asset distributes passive earnings only boosts the potential to build a strong trading community, that always keeps some of the asset in their wallets.
Dacxi have made sure the use cases for DAC are as robust as they can be for an exchange coin. Many people buy DAC Packs as they believe the DAC Coin has the potential to increase in value many times more than the big blue chip coins. The DAC Coin is the membership coin of the Dacxi ecosystem and has a greater value increase potential than most other coins. Its value comes from community services, exchange benefits and pre-ICO discounts. When you buy at market price you’ll receive up to 70% bonus coins based on the holding period or amount bought. You can find out more about the DAC Pack here.
Exchange Tokens and the Future of Crypto Coins
For many recent buyers of crypto, trading may be the only strategy available to make profits. While crypto coins have robust daily fluctuations, and allow for potentially lucrative strategies, some believe the days of easy gains are gone. Bitcoin has had its run from $1 to nearly $20,000 — an event that may never repeat again, as fiat buyers are becoming more cautious. That may be the case today, but our feeling is that another Bitcoin bull run is inevitable.
In the meantime it is possible to be proactive, instead of waiting around for a coin to go “to the moon”, based on the enthusiasm of outsiders. But those events are haphazard and rare — while trading is a learnable ability, and allows for constantly finding opportunities.
The addition of new pairs, and a native token economy makes it more difficult and more expensive for pump and dumpers. A high-volume market is harder to sway. Exchange coins serve that purpose.
As the bear market intensified, volumes would have disappeared without the boost from fixed-price tokens and several exchange coins. Since the traditional world of finance is slow to figure out the potential of crypto projects, the liquidity achieved on crypto-only exchanges is the key. With many projects coming on board, the crypto-only exchange will be a tool to gain positions, test projects and accumulate crypto assets, without over purchasing fiat funds. Those exchanges will enable buyers to be on the inside of the growth of crypto assets, waiting for the right opportunities.
Exchange tokens and coins are there for one reason — to encourage trading, and boost learning and engagement. Trading competitions, bounties and incentives are made possible. Exchanges also manage to achieve a level of organisation that is tailored to the crypto market, and will not work to stifle trades.
Exchange tokens also make traders think of value in a different way. Instead of using the intuitive value of fiat they are used to, they are measuring their success with another growing asset. While it may be intuitive to measure gains in “lambos”, and even take some profits, being a crypto trader is another game to be played, with skill and knowledge, instead of greed and emotion.
In the years to come, exchanges may help bring forward previously unknown assets, or re-balance the leading coins. Beyond Bitcoin, the fate of Ethereum will be decided in token-only trading, but also EOS, and the promising and upcoming Tezos. Many other projects are waiting to see where trading on the new crop of exchanges will lead them, in terms of price, visibility, popularity, volatility and gains potential. In the meantime do look into Dacxi.
We’re pioneering a new model we call the Community Exchange. In June 2018 Dacxi launched a public beta of both a simple and user-friendly exchange, and a community built on a scalable platform that can support almost any functionality. The community includes user generated content, a Coinpedia containing an objective analysis of the top crypto assets, and the Dacxi Learn education platform. It allows community members to complete module based courses to learn everything they need to know to get involved in crypto in a safe and responsible way.
One of our goals at Dacxi is to disrupt the crypto exchange market. In fact, we’d like to be the number one community exchange brand in crypto. If we can achieve this, we think we can help solve the mainstream adoption problem. Our mission is to help onboard the next wave of mainstream retail buyers into crypto.