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 would be futile. 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 currently 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 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 been born from one of the largest liquidity providers in crypto Alameda Research.
FTX having solved the liquidity problem had the opportunity to put 100% of their attention towards innovation and innovate they did.
To put it in perspective BitMEX the major derivatives exchange in crypto only currently has 8 markets. Whereas FTX has over 100 tradeable pairs. Not only does it have a large quantity of markets but of these markets some are brand new. FTX has markets for leveraged tokens, indices for privacy coins, altcoins, and DeFi tokens, prediction markets, hashrate futures. Its innovative features such as Quant Zone which allows users to create quantitative trading scripts directly on the platform, and its trading competitions have enticed many traders to sign up for the exchange.
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 fund is something exclusive to cryptocurrency 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.
We pointed out the requirements for a successful exchange token at the beginning of this article. You need a solid exchange, which can generate consistent liquidity and attract new users. And you need a token that is actually worth something which will encourage people to buy it. You can’t just print a new ERC-20 token and throw some marketing behind it. Value propositions such as buybacks, and fee reductions, competition entrys, among others are absolute crucial.
In terms of both a solid exchange and token value propositions FTT has both