The crypto market is dominated by Bitcoin and Layer 1 tokens. However, it’s exchange tokens that are one of the first points of contact for beginners. They are issued by centralized exchanges and give different incentives to users who hold them on their platforms. With the recent announcement of the third buyback of our native NEXO Token and the listing of FTT and HT, it’s time we look at the mechanisms through which they accrue value.
Utility, Forms of Payment, and Staking
If a cryptocurrency has another purpose outside of being a store-of-value then it’s said it has utility features. The utility will be described in the token’s whitepaper and potential buyers are made aware when the initial coin offering (ICO) takes place. Even though they are still bought mainly for investment purposes, exchange tokens work within the project’s ecosystem by giving benefits to their holders.
Most exchange tokens’ primary utility is to represent a form of payment. This is similar to how transactions on the Ethereum blockchain are paid for in ETH, for example. Should users decide to pay trading fees with the ecosystem’s native tokens they will be eligible for discounts.
Some exchanges will also offer staking rewards. They are only received when a user commits a certain amount of tokens to the ecosystem which will lock them for a specific amount of time. The mechanism may allow you to unstake your tokens before the unbonding period is over. Rewards come in the form of preferential rates, free withdrawals, and more.
The NEXO Way
With the NEXO Token, we’ve gone another route. We thought discounts are great, but higher interest rates and rewards on exchange transactions are even better! These perks will depend only on what’s the percentage of NEXO Tokens in your overall portfolio. Users that hold just a minimal amount are also getting rewarded. Holding NEXO Tokens automatically makes you part of our Loyalty Program with the following tiers:
- Platinum: more than 10% of your portfolio is in NEXO
- Gold: 5% to 10% of your portfolio is in NEXO
- Silver: 1% to 5% of your portfolio is in NEXO
- Base: less than 1% of your portfolio is in NEXO
The structure is flexible, as users are available to withdraw or add NEXO Tokens to get higher rewards, at any time.
To learn more about the rewards on each tier and see how you qualify for a 0% borrowing rate and 8% APR on Ethereum, visit the NEXO Token page.
Buyback and Burn Mechanisms
These two strategies applied by the issuers have a common goal — to reduce the circulating supply of the tokens thus making them more scarce. It’s basic economics, which means it may raise the price and create new demand for the token.
The difference between the two strategies is how the circulating supply is shrunk. When a token is burned it’s being moved to an unusable wallet address that can’t be accessed. Buybacks are more similar to how a stock could be bought back by the issuing firm, thus lowering the total number of shares on the market. As is the case with the NEXO Token the assets that are bought back are reinvested in the community. Upon repurchase, NEXO Tokens are locked for 12 months. Once the term expires, repurchased tokens will be dedicated to daily interest payouts to users of the platform.
Most exchange tokens bring utility and benefit from mechanisms that help preserve and even appreciate their value. Binance, BNB has been a mainstay in the top 10 tokens ranked by market cap, while FTT and NEXO Token have risen the ranks despite the volatile market. We look forward to listing more exchange tokens on our platform and are excited to see what the future holds.