KCS Token: What is an Exchange Token and How Does it Work?

2021/04/28 07:07:46

When it comes to cryptocurrency there are a number of different ways that you can get started and plenty of different options for types of currency to get involved with. Exchange tokens have definitely become an important part of that process lately. This is because cryptocurrency exchanges use what is referred to as ‘exchange tokens’ as a way to mark value and provide various functionalities. These tokens are bought, sold, and traded through the process of engaging with cryptocurrency.

Exchange tokens began to appear approximately in mid-2017. They are referred to as utility ("useful") tokens, as they provide their owners with certain products, services, or discounts. They can be used, for example, as a method of rewarding market makers who provide liquidity on the exchange.

The most common application of exchange tokens is to reduce trading commissions, as well as to provide clients with certain rights to participate in management (voting for cryptocurrency listing, etc.). Different exchanges find different uses for their tokens. A number of such coins managed to achieve quite a lot of success recently.

Why do crypto exchanges create their own cryptocurrency?

The value of exchange tokens is closely related to the efficiency of the underlying exchange. Their mechanism of action resembles the company's shares. However, in reality, tokens are not legally considered shares.

Exchange tokens perform two main functions - they increase the overall liquidity of the market and increase the user base.

Exchanges use several strategies to add value to their tokens. The most common of these is buying back their own tokens. Many crypto exchanges use part of the profit to buy tokens from users, and some exchanges even burn (destroy) them after that. This action is called a buy-back. Its purpose is to reduce the circulation of coins in a certain time, which effectively returns the value back to its holders.

Selected exchanges also use a strategy of converting small users’ balances (dust) into exchange tokens. Dust refers to a trace amount of cryptocurrency that's leftover after a trade or transaction. For example, as a result of using a referral program, customers receive small amounts of various cryptocurrencies. These amounts may be too small to be traded on the exchange. It is wiser to let the platform convert these balances into exchange tokens once a day, thereby pushing the price up.

What Determines the Exchange Token Price?

The main models for stimulating the growth of the exchange token price or maintaining it in a stable state are the following:

1)Token Burning - Destruction of coins in an amount equal to a certain percentage of the platform's profit. Detailed information on the token-burning process is usually provided on exchange websites so that users know how many tokens will ultimately be burned and over what period. The selected percentage of profit also varies, but it usually ranges from 20% to 30%.

2)Dividends - KuCoin, as well as some other crypto exchanges use a dividend model. The bottom line is this: if the volume of payments exceeds the average level of passive income (staking, etc.), the price starts getting supported by dividends. There are special calculators for calculating such dividends.

3)Transactional mining - This process significantly increases the circulation of tokens and, as a result, their value.

4)Holding Initial Exchange Offerings (IEO) - To participate in an IEO, the user usually has to “lock” their tokens for a certain period. It has been verified in practice that the capitalization of the coin increases by 20-30% (on average) due to the increased public interest. However, after the end of the IEO, the price may drop again.

5)Trading commission discounts - The offer is expedient and beneficial for both exchanges and users. To make it more useful and stimulate the growth of the price, some exchanges introduce a rule that the discounted amount depends on the amount of coins stored in the account.

6)Voting and other management functions - By giving privileges to token holders, the exchange allows them to influence their ecosystem. The wider the opportunities for such influence, the more the coin will grow in price. Some features of the exchange are publicly announced, while others remain hidden. Examples, other than voting for a listing, include: the opportunity to participate in airdrops and promotions, become a project ambassador, etc.

Another important influence is whether the exchange token can be used as a means of payment in other projects or as a native token on a separate blockchain.

Exchange Token Application

Exchange tokens provide a lot of benefits to its holders. The main one, which is supported by all exchanges, is the ability to save on trading commissions. For example, KuCoin exchange distributes a daily dividend of the total trading fees to users.

Management rights and airdrops are common benefits for both parties, ensuring an influx of traders and investors to the platform.

So, exchange tokens are a very interesting and promising type of tokens. Their concepts and mechanisms can make it much easier for users to work with the platforms. The main advantage of such coins is that they initially already have an associated and working project.

Understanding KuCoin Token (KCS)

When it comes to understanding exchange tokens better, it definitely helps to discuss a specific token that you could be working with. This is where the KCS token comes in as one of the most prominent exchange tokens. The main reason for KCS’ success is its native platform, KuCoin. KuCoin is actually the top exchange platform in globalization deployment. This means that it is certainly a force to be reckoned with, especially when you consider that they have carried out over 754,675,745 trades. This is a huge number that shows there are a large number of different traders using the platform at any given time.

KuCoin token was created back in 2017, meaning that it has been around for more than a few years now. It allows for traders to benefit from the growth that occurs within the exchange. They originally started as ERC-20 tokens that ran on the Ethereum blockchain, which meant they worked with Ethereum wallets. However, this is more likely to change moving forward.

Why Get Involved?

When it comes to KCS, you may want to look closer and consider getting involved because there are various bonus options to allow for passive income. Anyone who owns at least 6 of these tokens is able to earn a daily bonus. This bonus will depend on the specific number of tokens that are owned by the individual as well as the overall trading volume that occurs within the exchange. With the way that this trading volume is working currently, there has been a bonus of over 30%. However, there is always the possibility that this number will increase or decrease going forward.

Another important aspect to consider is the way in which KCS can be used. In general, they’re able to assist users in getting discounts of up to 20% when they are executing a trade. That’s because they can take up to 20% off the trading fees that are otherwise levied on individual trades. They can also be used for token sales related to KuCoin Spotlight, Lock/Drop/BurningDrop and more. Not to mention there are a number of ways that they can be utilized specifically as a payment method, which increases their overall versatility for users in general.

For example, there are a host of different ways that KCS can be used to pay for things, like working with SwirlPay, which accepts and supports KCS payments. Another place to use KCS is PlayGame, a gaming platform that allows for the use of KCS for game purchases. Travala is the leading blockchain travel booking platform and is also currently accepting KCS as a resource. So is Print-ted, which makes fashion products. PundiX accepts KCS, which means that anyone else who accepts this platform will be able to be paid using the currency. And there is Splinterlands, which sells monster card packs using KCS. BetProtocol allows for the use of KCS tokens for gaming as well as for utilizing their lending/borrowing functionality.

What Comes Next

In the future, it’s likely that KCS is going to become an even bigger player in the cryptocurrency sector. This is because it will provide even more options and optimization for smart contracts, as well as more dimensions to the way in which KCS can be utilized. The system is already looking to upgrade its smart contracts. By the end of 2021, it is expected that KCS will become the fuel and native asset for KuCoin’s system of decentralized financial services. This means there will be even more opportunities for advancement with the currency.

Furthermore, there will be the Empowering KCS system, which will enhance the abilities of the token and provide further benefits for those who are currently in possession of KCS. The company looks to reach either the top 30 or the top 15 in terms of its token’s market capitalization within the next 2-3 years, which will provide an even greater return for holders.

Exchange tokens are certainly a growing field with a lot of room to grow. Tokens such as KCS have the option to provide instant and valuable utility to its users, making them one of the rare cryptocurrencies with actual use cases. While every investment carries risks, it certainly wouldn’t hurt to take a closer look at exchange tokens and see what they offer.