There has been a huge rise in the number of exchanges offering their own exchange tokens. The early days were brought about by Binance’s BNB token. Which launched during the famous bull run of 2017. Since its launch, returning over 13000%. Other major Exchanges like, Bitfinex, Huobi, Bitmax, Kucoin, among others have all launched their own exchange tokens since. The newest exchange token to be launched is FTT. Backed also by a brand new derivatives exchange FTX. But where does FTT fit into this already competitive market? Does it have good value propositions? Lets find out, this is our FTT Token Review.
The Exchange Itself
To review an Exchange token without reviewing the exchange itself seems like an exercise in futility. You can have the best value propositions ever but if you’re exchange is poor then your token will reflect that. We have previously gone in depth on the FTX Exchange in our FTX Exchange Review. However we will cover it briefly here.
As previously mentioned FTX is primarily a Cryptocurrency Derivatives Exchange. Derivatives trading is where the vast majority of cryptocurrency trading occurs and it is this market that FTX is targeting. The current market leader being BitMEX which has traded over 1 Trillion dollars in the past year alone.
FTX is giving BitMEX a run for its money. BitMEX’s essential monopoly on cryptocurrency derivatives trading lead them to complacency. Issues with downtime, order submission errors among others all allowed FTX to pick up the pieces as traders looked for alternatives.
One of the main hurdles other exchanges have right out of the gate is liquidity. If you don’t have liquidity you cannot attract users. FTX had this issue solved right from the beginning having the largest liquidity providers like Alameda Research already trading on the platform.
Having liquidity arranged from day one has allowed FTX to innovate in other areas. One of these areas is the vast array of products that FTX offers. Some examples: Altcoin index’s which allow traders to long or short the altcoin market as a whole, Bitcoin options contracts, Moon and Doom leveraged erc-20 tokens, and altcoin derivatives not found on any other exchange. FTX has also just finished its Trading Battle Royale in which over 100,000$ were given away in prizes to the top traders. Read our full article on the FTX Battle Royale here!
In summary FTX is one of, if not the most innovative exchange in crypto right now and as its liquidity continues to grow I can’t see that stopping.
The Tokens Value Proposition
FTT’s token utility is not too dissimilar to something like Bitfinex’s LEO token. However, there are some unique elements.
Much like LEO and Binance’s BNB, FTX carries out token buy back and burns based off of revenue generated by the exchange. Currently 33% of all fees earned by FTX will be used to buy and burn FTT tokens. The thought process behind buy and burn schemes is to drive up the price of FTT tokens by continuously reducing the supply. What is however unique to FTT is the concept of socialized gains in which a portion of money added to the exchanges insurance fund will be used to buy back FTT. The insurance food is something exclusive to derivatives exchanges and ensures users on the exchange are liquidated properly should their not be enough liquidity from traders to close someones position.
We’ve performed backtests and live simulations to see how FTX will fare during large market movements. While other futures exchanges suffered from clawbacks, FTX managed to net increase their insurance fund by a sizeable amount thanks to its unique backstop liquidity provider program. For instance, during a recent market move, Okex incurred ~$3 million of clawbacks. Meanwhile, our demo simulation which mirrored positions on OKEx demonstrated no clawbacks and a net gain of a million to our insurance fund.FTT Token Whitepaper
Holders off FTT get the standard fee reduction on the exchange depending on how much FTT they hold. The fee reduction applies to both the live markets and OTC trading.
FTT can also be used alongside USD, USD Stablecoins, and BTC as collateral (to prevent liquidation) for trading on the exchange. The FTT token was also used to ‘stake’ (bet on) traders in the previously mentioned FTX Battle Royale. Over 48,000$ in rewards were given to stakers. There was also no risk involved stakers could not lose money if their trader lost money. It will be interesting to see in the future how FTX generates new and interesting ways FTT can be used like the Battle Royale.