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Exchange tokens: what are they and why buy them

Many crypto exchanges not only list coins of third-party projects but also issue their own tokens. Learn why exchange tokens are needed and how you can profit from them.

EXMO Coin Overview

Exchange tokens are utility tokens used within the crypto exchange ecosystem to pay for services, as well as hedge risks during a market fall. Such tokens also provide various bonuses and benefits for using exchange tools and products.

How exchange tokens work

Most exchanges create tokens on the blockchains of other projects, most often on Ethereum. For instance, EXMO Coin (EXM) is an Ethereum-based ERC-20 token. The main advantage of this protocol is that it is supported by a majority of crypto exchanges and wallets.

How to get exchange tokens

Most exchange tokens are distributed through an Initial Exchange Offering (IEO). They can also be distributed through an airdrop, a popular marketing technique used by crypto platforms. In case of an airdrop, users can receive tokens for free or in exchange for completing a minor task, for instance, for mentioning the exchange on social networks.

Once an exchange token has been sold via an IEO or airdrop, it can be traded just like any other cryptocurrency. However, the main purpose of such tokens is to pay for exchange services.

After the successful completion of IEO, EXMO Coin is available for purchase on the exchange. You can also get it for free as a reward for user activity.

Exchange token EXMO Coin

EXMO Coin (EXM) is the platform’s native utility token. The token’s smart contract is based on Solidity – programming language for writing Ethereum smart contracts. EXMO Coin fully complies with international security standards such as ISO/IEC 27001 and CryptoCurrency Security Standard (CCSS).

According to Cryptorank, EXM remains the most profitable exchange token of both the month and the year. As of 19th July 2021, its ROI is estimated at more than 2000%.

ROI EXMO Coin
As of 19th July 2021. Source: cryptorank.io

How token price is determined

Crypto exchanges use several strategies to increase the value of their native tokens. The most common include token buyback and burning.

Burning is the act of removing a certain amount of tokens from circulation either by redeeming them from the community or extracting them from the existing pools. As described in the whitepaper, every quarter, EXMO goes through a process where it burns EXM from Premium Cashback sales. The idea behind the quarterly burn is to gradually reduce EXM supply by as much as 50%..

Each burning event reduces the number of tokens in circulation, thus reducing their supply. Therefore, the token’s price is rising even when demand remains unchanged.

On 6th July 2021, the total supply of EXMO Coins decreased to 223 million tokens after the scheduled quarterly burn. The issuance of additional EXM coins is impossible.

Burn
event
EXM
burned
EXM
price
in BTC*
EXM
price
in USDT*
USD
value*
Upcoming
Q3 2021
647,354 ≈ 0.000
00277
≈ 0,096 ≈ 58,262
Q2
2021
3,971,
092
0.0000
0159
0.093 369,311
Additional
burn
100,000,
000
0.0000
0023
0.01136 1,136,
000
Q1
2021
2,217,
047
0.0000
00113
0.0037 8,203
Q4
2020
2,951,
875
0.0000
0032
0.00425 12,545
Q3 3
2020
2,092,
034
0.0000
0031
0.00256 5,355
Q2 2
2020
954,160 0.0000
0036
0.00247 2,356
Q1 1
2020
354,291 0.0000
0063
0.00463 1,640

*at the time of burning

Features and benefits of exchange tokens by example of EXM

The main advantage of exchange tokens is that they reduce service prices for users, including crypto trading fees. For instance, EXMO Coin holders get an increased cashback rate that reduces fees by up to 100%.

Among benefits that will soon become available to EXMO Coin holders are reduced margin loan fees.

The role of exchange tokens within a portfolio

Exchange tokens are a perfect portfolio diversification tool. Thanks to their low correlation with major cryptocurrencies, they allow you to profit amid market correction. Exchange token prices can rise even during bearish market sentiment and BTC price fall. The chart below shows EXM price growth amid the June market correction.

EXM rates
EXM price growth amid the June market correction. Source: tradingview.com

During downtrends, traders can make money either by trading or by holding exchange tokens. Due to their high volatility, exchange tokens are perfect for active trading, including margin trading.

These tokens are also good for holding since the token economy model provides for their value increase in the long run. According to CoinMarketCap, as of 13th July 2021, two exchange tokens are among the TOP 10 cryptocurrencies by capitalisation, along with BTC, ETH, ADA and other coins.

You can also track EXMO Coin’s performance on TradingView.

Where to buy exchange tokens

You can buy exchange tokens on the platforms that issued or listed them. EXMO coin is available for purchase on the EXMO platform in pairs with USD, RUB, BTC, ETH and USDT.

Exchange tokens are fast-growing and promising digital assets. They make it easier to use a trading platform while also allowing traders to save on fees. Such tokens also help diversify risks during market falls. But their main advantage is that they are initially associated with a successful project.