Cryptocurrency exchanges are among the most profitable business that can be started in the blockchain space. Exchanges like Binance and Bitfinex process billions of $ in daily trading volume, which, reportedly, earns top exchanges north of $500 million per quarter.
For years, retail investors used to be excluded from being able to invest in these exchanges and profit off of their success. This drastically changed in late 2017 when Binance announced a token sale for its BNB token. Through a fee reduction and burning mechanism, the value of BNB is directly proportional to the success of Binance, which gives investors a solid vehicle to get exposure in the cryptocurrency exchange business.
At the time of writing, BNB is trading at around $10, which is a 10,000% increase from what ICO investors paid just one year ago. These outlandish returns have led many people to ask themselves if there are other cryptocurrency exchange coins like BNB, which is precisely the question that we will be answering throughout this article.
As always, please also do your own research. This article is not investment advice.
Honorary mention to the largest and most established cryptocurrency exchange coin. Binance sold its BNB token in late 2017 in an ICO that raised $10M. At the time of writing, Binance is the largest cryptocurrency exchange, its 7 million active users make an average of $3 Billion worth of trades on a single basis. This nets Binance around $1 Billion in profit per year.
The BNB token has several use cases and the CEO of Binance, “CZ (Short for Changpeng Zao is clearly showing that one of the main objectives of the exchange is to give the token as much utility as possible. BNB is currently being used to reduce trading fees, in order to vote for new coins to be listed on the exchange, to increase rewards for referrers and more.
CZ has also recently announced that he his team has been secretly working on a project called “Binancechain”, which will be used to build a Binance Decentralized Exchange and will, in the words of Changpeng “Be powered by BNB”.
In a separate article, we covered why you should watch BNB if you are investing in the security token market. Do check it out if you find Binance Coin an interesting asset.
BNB is currently trading at around a $1.2 Billion market capitalization. The largest market to purchase BNB is, understandably, Binance.
With a daily trading volume of $500 Million, Huobi is currently the fourth largest cryptocurrency exchange. The firm recently announced the launch of the HT token, which aims to serve a similar role on the exchange as BNB does in the Binance ecosystem. Huobi did not hold an ICO for its coin, instead, it sold HT coins on the open market for 30 days, and investors could purchase them on a first come first serve basis.
During that time period, 60% of the total supply (300 Million Huobi Tokens) were distributed to investors, the rest was kept by the company as an incentive for the team and for user rewards and platform operation related costs.
HT has several utilities on the Huobi exchange. The token can currently be used for reducing trading fees, as a security deposit to become a certified OTC trader on Huobi, as a trading pair for major currencies and also as a voting tool for deciding which new coins should be listed on the exchange. Furthermore, HT holders will also be entitled to receive newly launched coins on the exchange from time to time and Huobi also has a buy-back where it purchases HT from the open market every quarter.
At the time of writing, Huobi Token is trading at an $80 Million market capitalization. This is significantly lower than the market leader BNB and could be a reason to keep an eye on HT.
0x Protocol (ZRX)
Although 0x Protocol is not an exchange itself, its software is already powering tens of different cryptocurrency exchanges. These exchanges are referred to as “Relayers” by the 0x team. Some notable examples include Ethfinex, Radar Relay, and Paradex (which was recently acquired by Coinbase). The project also counts with the support of many highly respected names in the space, including the founder of Coinbase and the founder of Augur.
The main utility of the ZRX token is as a currency to pay fees on 0x relayers and as a method of governance for the protocol. Admittedly, ZRX tokens are not crucial for the functioning of the platform, something that critics of the project have been very vocal about. That being said, the 0x protocol community is very engaged in its development and has made several proposals to upgrade the value capture model of the ZRX token.
Many respected names in the space, like the CEO of Binance, have publicly stated to believe that decentralized exchanges are the next logical step for the cryptocurrency industry. If the 0x Protocol manages to retain its market leader status and develop a better token model for ZRX, it could become a core infrastructure of the space.
Interestingly, ZRX was the first ERC-20 token to be listed on Coinbase. This gives the token exposure to the millions of users of this fiat to crypto exchange and could potentially accelerate adoption of the protocol and improve its governance model.
ZRX is listed on all major cryptocurrency exchanges and is currently being traded at a $400 Million market capitalization.
Kucoin received a lot of attention from the broader cryptocurrency community in early 2018 after listing many small-cap coins which larger exchanges like Binance refused to list. Although the exchange’s volume has fallen significantly since its peak in January 2018, it still counts with a strong community that uses it as their exchange of preference due to its simple user interface and a large selection of coins. At the time of writing, Kucoin is processing an average of $20 Million in volume a day.
KCS, Kucoin’s native coin, is one of the few tokens that have been consistently paying dividends to token holders. Every day, Kucoin distributes a 50% of all the trading fees it generates to KCS token holders. This is referred to as the “Kucoin Bonus” by the exchange. Interestingly, this bonus is not just paid in KCS tokens but in all currencies that are listed on the exchange. Every single day, KCS holders receive a small number of dozens of small-cap coins.
At the time of writing, KCS tokens are giving around a 5% yearly ROI. This means that if you purchase $1,000 KCS, you can expect to receive $50 in dividends every year. You can use the official KuCoin bonus calculator to get a more precise figure.
Since the value of KCS is directly related to the volume that the exchange generates, it should especially be kept an eye on by investors that think Kucoin will continue growing in the near future. At the time of writing, KCS has a $90 Million market capitalization.
Republic Protocol (REN)
Republic protocol is a decentralized dark pool protocol. Dark pools are anonymous OTC markets where large investors can trade without affecting the price of the underlying asset. In traditional equities markets, dark pools account for a 15% of all trading volume. It is estimated that this percentage is much higher in the crypto space since trading volumes are significantly lower and order books thinner.
Republic Protocol (REN) is similar to 0x (ZRX) in the sense that it is not an actual exchange, but a protocol that entrepreneurs can use to build exchanges, in this case, dark pools. That being said, the value proposition of the REN token is significantly clearer than ZRX and is very strong in the eyes of the community and hedge funds like BlockTown capital.
Dark pools powered by Republic Protocol match orders through so-called “Dark Nodes”. These nodes earn fees by processing orders from traders. Anyone can create a Dark Node by staking 100,000 REN and setting-up a node with a provider like Amazon Web Services or Digital Ocean. The process of setting up a dark pool is very straightforward and the team has prepared a set of tutorials that explain step-by-step how to go about it.
The Republic Protocol team has mentioned on several instances that it plans to support trading of security tokens in the near future, this is why REN was also mentioned in our list of coins to watch when investing in the security token market. REN is listed on OKEx and Huobi and is being traded at a $15 Million market capitalization.
In the second quarter of 2018, Switcheo made headlines for becoming the first decentralized exchange on the NEO blockchain. NEO is a Chinese smart contract platform that has been referenced by many as the “Ethereum of China”. The start-up held a token sale in March to sell its SWTH token, the ICO ended in less than a day after hitting the hard cap of $8.7 Million.
Swicheo currently supports trading of NEO, GAS, and a handful of NEP-5 tokens like Ontology and DeepBrainChain. The company has announced that it also plans to support Qtum and ERC-20 tokens in a future release.
Neon Exchange (NEX)
Similarly to Switcheo, Neon Exchange is another decentralized exchange built on the NEO blockchain. The project was founded by highly respected individuals in the space like Fabio Canesin – co-founder of City of Zion, Fabian Whale – PhD in Machine learning from ETH Zürich, and Ethan Fast – creator of NEON Wallet and PhD in AI from Stanford. The project also features several well known advisors, including Da Hongfei – founder of NEO.
NEX tokens enable token holders to generate income through Proof of Stake. It works in a similar fashion to how NEO holders receive GAS for staking the coins in their wallet. The fees distributed to NEX holders are generated from a portion of the platform revenue.
Bibox is a cryptocurrency exchange that is mainly focused on the Asian market. It started gaining traction in early 2018 after listing some high-demand Asian coins, being one of the main DAI stablecoin markets and overall launching a very intuitive and powerful user interface.
Bibox has a native coin living on the Ethereum blockchain, BIX. Token holders are entitled to a 20% share of all profits generated by Bibox. Furthermore, BIX investors can also benefit from discounted trading fees on Bibox, which start at 50%. That being said, there are rumors that BIX holders may need to make at least 1 trade per week in order to qualify for the dividend, this rumor could not be verified by the CoinDiligent team.
At the time of writing, Bibox has an average daily trading volume of $200 Million. BIX is currently being traded at $35 Million market capitalization.
IDEX is a decentralized exchange built on Ethereum, the project held a token sale back in December 2017 where it raised $4.8 Million by selling its AURA token. IDEX’ daily volume peaked in early 2018 at $5 Million, and is currently hovering at $1.5 Million, making it one of the most liquid decentralized exchanges.
The exchange saw a quick growth due to its “no-listing-fee policy”, which opened the gates to a large number of listings of coins that could not get listed on other exchanges. Many altcoin traders see IDEX as an exchange to purchase small-cap coins before they get listed on larger exchanges.
The IDEX AURA token distributes all fees generated from the exchange to AURA investors that staked their tokens. In order to keep the exchange as decentralized as possible, IDEX only pays dividends to AURA holders that also run a service node for the exchange.
Kyber Network (KNC)
Kyber Network is a decentralized exchange built on Ethereum that raised $52 Million in a token sale last year. The exchange is already live and has an average daily trading volume of $0.5 Million. Kyber recently announced that they are exploring other new segments like payment processing, KYC verification, and a regulated ICO platform. The company aims to make its native coin, the KNC, a core component of these new endeavors.
KNC has two main utilities. The first one is its use case to pay partners that bring new users to Kyber Network, these partners include platforms like wallets, block explorers and media sites. However, it is hard to determine how this first utility would add value to the KNC token since partners don’t have an incentive to hold the token and may sell it immediately.
The more interesting utility is the second one, where Kyber Network reserve operators need to purchase KNC in order to start providing liquidity to the network and earn fees. Reserve operators need to pay a tiny fee in KNC to “obtain the right” to fill an order, this fee in KNC is permanently burned. Therefore, the more Kyber Network is adopted, the more KNC are burned over time which reduces the total circulating supply and hence should increase the price per token.
KNC is currently trading at a $50 Million market capitalization.
Bancor is a decentralized exchange built on Ethereum with zero trading fees. In contrast to other cryptocurrency exchanges, on Bancor price discovery is performed by an algorithm, not by traders. In essence, the core component of the Bancor Network is a smart contract that automatically provides a buy and sell price for coins. This is a novel concept that has not been implemented before.
The exchange is currently processing $2.3 Million in daily trading volume. This makes it one of the most liquid decentralized exchanges, right next to IDEX. Interestingly, Bancor’s utility BNT is also the most liquid token on the exchange, accounting for 50% of the daily trading volume. Bancor defines the utility of BNT as “the hub network token for the Bancor Network”, which is rather vague.
After raising $153 Million in an ICO in Summer 2017, Bancor should be one of the projects with the largest war chests in the space. This is a factor that investors should keep in mind when trying to value the BNT token since it enables the project to allocate significant funds to R&D, which could have a positive impact on BNT price over extended periods of time.
At the time of writing, BNT is valued at a $70 Million market capitalization.
Crypto Bridge (BCO)
Crypto Bridge is a decentralized exchange built on the Bitshares platform that is focused on small-cap “Proof of Work” coins. PoW type coins, like “Gentarium” are usually disregarded by large exchanges since they often have very small communities, and can’t afford an expensive listing fee since there is no actual management team behind them.
Crypto Bridge never held an ICO, its BCO tokens can be mined through PoW (in a similar fashion to Bitcoin) and there is a maximum supply of 27 Million coins. BCO token holders are entitled to 50% of all trading fees generated on the exchange. Crypto Bridge currently has a $1.5 Million average daily trading volume.
BCO is currently valued at a $35 Million market capitalization.
COSS is a Singapore-based cryptocurrency exchange that aims to solve the user experience problem in the space by bringing all features of the cryptocurrency space to a single portal. After launching its platform and onboarding the first users, the company held a token sale which raised $3.1 Million.
The two main utilities of the COSS token are to reduce platform trading fees and to distribute generated platform fees to token holders. In contrast to other dividend token models, COSS holders need to withdraw their rewards manually by executing a smart contract command. The project had to incorporate this policy because it avoids them from being tagged as a security, as token holders need to “complete a task” to obtain their reward.
At the time of writing, COSS exchange has an average daily volume of $0.5 Million and the COSS token is valued at a $7 Million market capitalization.
Cryptopia Fees Shares (CEFS)
Cryptopia is a New-Zealand based exchange known for listing micro-cap coins that usually don’t get approved on larger exchanges. At the time of writing, the exchange has an average daily volume of $5 Million, which makes it one of the most liquid micro-cap altcoin exchanges in the space.
The native coin of Cryptopia, the CEFS, has no inherent utility other than paying dividends. There are 6,300 CEFS coins in total, and CEFS token holders are entitled to 4.5% of all fees generated by the exchange. Token holders don’t need to do anything else other than holding their CEFS tokens in their Cryptopia wallet in order to receive their monthly dividends. You can calculate here the expected fees generated from holding CEFS.
CEFS is currently trading at a $5 Million market capitalization. However, liquidity for the token is practically non-existent (around $5,000 in daily volume), which may force investors to pay a significant premium when purchasing the token.
Beaxy is an upcoming cryptocurrency exchange that aims to beat platforms like Binance by offering more highly requested features and more transparency. The exchange is also planning to immediately support fiat deposits/withdrawals, which is another significant advantage to other players in the space.
The main utility of the Beaxy token (BXY) is to reduce trading fees. Traders will be able to reduce trading fees by up to 75% by jointly making use of the Beaxy staking program, and using BXY as the base currency for their trades.
At the time of writing, the Beaxy exchange was not live yet since the company is still holding its token sale. As soon as the platform is live and fully operational, we will update this section with more details.