What makes a good exchange token and how does one evaluate them? What are the various factors that need to be considered in order to make an informed decision? Are burn rates more important than the utility or is the opposite true? How is the demand formed and what makes the project sustainable? Keep on reading to get your answers below!
Important factors to consider for determining the exchange token value
The exchange tokens are created to serve a set of utility purposes for the exchange users. The users want the native tokens in order to benefit from the discounts on trading fees, giveaways, airdrops and other incentives that they provide. This is how the native tokens stay in demand.
If you look at the EMRX token as an example, you will quickly realize its crucial role in the Emirex ecosystem. Emirex is focused on delivering the first in its class Digital Commodities Exchange which will be an alternative investment platform focusing on tokenizing the annual USD$20 trillion commodities sector. The exchange will also host the trading of tokenized equity and debt instruments of commodities companies, as well as actual physical commodities, such as precious, industrial & rare-earth metals, precious stones, and energy commodities. The EMRX token is what gives the users access to all of the above, and more.
Additionally, the ecosystem members can earn EMRX for proactive engagement with the wider community of traders, investors, issuers, and partners, who are the direct beneficiaries of the growth of EMRX. This is the mechanism that drives the growth and generates a network effect. A well-performing token that fulfills a variety of needs is a sure indicator of a good exchange.
Another important factor to keep in mind when evaluating an exchange token is the tokenomics model. Consider the entire project useless without a sustainable tokenomics model. The tokenomics should drive the interest of the market participants. What is a good tokenomics model? Without going too deep into technicalities, here is the answer: a good tokenomics model always includes a sustainable ecosystem, a credible expert team combined with a good post-sale token allocation, sufficient token lock-up period, appropriate legal compliance and a sustainable business model, all of which must ensure that the project - and the token - will thrive in the long run. Emirex provides all of the above. When it comes to the token supply, the less the number of tokens - the higher the demand. EMRX token burning will further reduce the already limited supply of 500 000 000 tokens by a half.
A major role in the evaluation of a particular exchange and its token is played by the reliability of the information on the trade volume it provides. This is when the legal compliance yet again adds to the trustworthiness of the exchange. It is important to note, that Emirex is going to be a Central Bank regulated entity by January 2020, which removes the risk of manipulated trading volume (the so-called “wash trading”, a popular method used by unregulated exchanges in order to fake up to 95% of their activity, as reported by Bitwise this year).
The next parts of this article series talk about the reasons behind the outstanding performance of the exchange tokens: