There are various types of cryptocurrencies, from native coins to stablecoins, utility tokens, exchange coins and tokens, and governance tokens. This guide focuses on exchange coins and tokens. Read on to learn about their functions.
Understanding Exchange Coins and Tokens
Exchange coins and tokens are cryptocurrencies issued by crypto exchanges. They serve various purposes on those trading platforms. For example, the BNB coin, issued by Binance, the world’s largest exchange by trading volume, offers customers trading fee discounts. In addition, its holders can become early investors in crypto projects launched via Binance’s Launchpad or LuanchPool.
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Exchange Coins vs Exchange Tokens: What’s the Difference?
Many crypto users use the terms coin and token interchangeably. But the truth is there is a difference between the two. A coin is a native crypto of a particular blockchain, while a token is created atop a blockchain. For example, BNB is native to the BNB Smart Chain, which powers Binance. This makes it an exchange coin. KC, on the other hand, powers the KuCoin exchange but was built on the Ethereum blockchain. That makes it an exchange token.
An Exchange token can be migrated to a native blockchain if an exchange decides to build its own network. For instance, Crypto.com initially issued its exchange token, CRO, on the Ethereum network but later migrated it to its self-developed blockchain, Cronos.
Why Should You Invest in Exchange Tokens and Coins?
Numerous benefits come with investing in Exchange tokens and coins. They include:
Discounts on Trading Fees
As mentioned, traders who use exchange tokens or coins to pay for trading fees enjoy discounts. Reduced transaction costs allow these traders to retain a large portion of the generated profits. Some of the exchanges known to offer massive trading fee discounts to holders of their native coins or tokens include Binance, KuCoin, and Houbi.
Value Appreciation
Many exchanges have implemented token burn mechanisms, which involve permanently removing a specified amount of exchange coins or tokens from the circulating supply to boost the value of the remaining tokens. So, as an investor in exchange coins and tokens, you could earn a reasonable return on investment if the assets appreciate in value.
Governance
If you want to be part of the governance system of a particular crypto exchange, then investing in its native coin or token is recommended. For example, if you invest in the exchange token of Uniswap, you will earn the right to raise and vote on proposals. That way, you’ll be an active contributor to the development of this decentralized trading platform.
Yield Generation
Some exchanges allow investors of their native tokens and coins to stake them in exchange for annual yield. Crypto staking offers a convenient way to earn passively.
Popular Examples of Exchange Tokens and Coins
1. BNB: Offered by Binance, BNB is the largest exchange coin by market cap. As stated, its holders enjoy several benefits, including discounts on transaction fees and exclusive access to investment opportunities.
2. BYT: This exchange token is issued by Bybit. It runs on the Ethereum blockchain. Holders of BYT are part of the exchange’s governance system, meaning they can vote on major decisions affecting the future of Bybit.
3. GT: Created on Ethereum, GT is the exchange token of Gate.io. Its holders are allowed to vote on raised proposals and enjoy discounts on trading costs. Moreover, GT investors get exclusive access to token sales.
4. OKB: Initially issued on the Ethereum network, OKB is OKX’s exchange coin, which now operates on the OKT Chain. Its holders get early access to new crypto projects on the OKX Jumpstart platform. Also, OKB investors receive massive trading fee discounts.
Expanding Exchange Coins and Tokens’ Utility
Besides being used on their native trading platforms, some exchange coins and tokens are now accepted as payments, just like Bitcoin. For instance, most merchants on Shopify accept BNB payments. Additionally, food delivery app Takeaway started accepting BNB a few months ago.