What is Exchange Token

Exchange tokens are digital assets issued by crypto exchanges. A crypto exchange may launch its own token for multiple reasons. Most exchange tokens generally are used as rewards to incentive an exchange's liquidity or used as fee discounts to encourage trading activities. In addition, the token can be used to facilitate an exchange's community governance.

Incentivize Liquidity

A crypto exchange might use its exchange token as an incentive method to stimulate traders to bring more liquidity into markets. For example, in general circumstances, a DEX will distribute its exchange token as a reward to the trader who provides liquidity to the pool within a certain time. This can attract traders to help the DEX increase a particular pool's liquidity.

Encourage Trading Activities

A crypto exchange generally requires a trader to pay a transaction fee when executing an order. In most cases, to encourage trading activities, users will acquire a discount from the exchange when paying transaction fees by using the exchange tokens. In addition, some exchanges might offer a tiered fee discount to users based on the number of exchange tokens that a user holds in the account.

Facilitate Governance

Crypto exchanges might distribute exchange tokens for governance purposes. Holders of the exchange token will have voting rights for exchanges' future development. While this use case is not as common as others, many DEXs already issued their exchange tokens to accomplish their transition process to community-run exchanges. For example, the $UNI of Uniswap.

What is Uniswap? What makes it outstanding in the crypto market? Please refer to the content: What is Uniswap

Others

Except for the fee discounts and voting rights mentioned above, exchange token holders might acquire other rewards or rights in particular circumstances. For example, for a holder who holds exchange tokens for a certain amount in a specific time period, exchanges might offer projects' IEO opportunities to them.

Examples of Exchange Tokens

• BNB: Build and Build, formerly Binance Coin, is initially issued as the exchange token of Binance that can be used to trade cryptocurrencies and pay for fees on the Binance exchange. Then, $BNB is also used as the native asset of the BNB Chain.
• OKB: a cryptocurrency released by the OK Blockchain Foundation and Maltese crypto exchange, OKX.
• KCS: KuCoin Token. KCS is the native ERC20 token of KuCoin, a centralized crypto exchange issued in 2017.
• LEO: UNUS SED LEO. LEO is the utility token for Bitfinex and other iFinex trading platforms. iFinex Inc. (iFinex) is a privately-held financial technology company that operates virtual currency trading platforms under the business name Bitfinex and provides numerous other cryptocurrency and crypto-asset-related products and services.

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