The Relationship between Platform Tokens and Exchanges: Exploring Their Inseparable Connection

Hello everyone, last time we talked a lot about platform tokens. This time, let’s discuss the issuance of platform tokens by exchanges and some of the correlations involved. Throughout this discussion, I will provide examples of platform tokens and their past practices.

What is the goal of exchanges issuing platform tokens?

Some people believe that exchanges or platforms issue their own tokens to raise funds and facilitate development. In reality, there’s nothing wrong with these reasons, but they are not the actual goals. They are at most secondary objectives. Please note that I’m referring to legitimate exchanges here, not fraudulent platforms.

Why do I say this? Well, it’s because individuals without financial resources and connections cannot afford to establish an exchange, let alone issue platform tokens. Those who are capable of launching an exchange typically possess a certain level of wealth and connections. For them, the true goal of issuing platform tokens and seeking funding is to engage in discussions and secure financing from venture capitalists (VCs).

The reason behind this is that an exchange is essentially a gambling platform. Under normal operations, it doesn’t involve winning or losing but serves as a steady source of revenue through transaction fees. For VCs, they have the opportunity to acquire shares of the exchange or even future tokens at an early stage, allowing them to easily achieve returns of tens or even hundreds of times their investment. From the perspective of founders, gaining the trust of VCs is far more valuable than gaining the trust of retail investors. When raising funds from retail investors, you need to have an exchange first to issue tokens, whereas VCs don’t require that. Additionally, you must ensure that you don’t fail during the development process before considering raising funds from retail investors. If you’re an individual retail investor who invests in exchanges solely based on a whitepaper, I believe your investment risk is exceedingly high.

What is the actual goal of exchanges issuing platform tokens?

In fact, the actual goal is promotion and customer engagement. Every platform knows that without customers and a community for promotion, it’s impossible for an exchange to thrive. Can you tell me today why you choose OKX or why you choose Binance? Each user may have their own reasons, but if there is one best reason, it is who has made you the most money. Let’s review the past popular platform tokens, such as BNB and FTT. BNB’s token burn mechanism, numerous IEOs, and strong support from Binance have contributed to its deflationary nature. As a result, many users have made significant profits on Binance. These customers, due to their holdings of BNB and the profits from participating in IEOs, are tightly bound to using Binance. With BNB continuously being burned and its price trending upward, it also serves as a measure for evaluating platforms: the price of the platform token. This has solidified Binance’s position as the top global exchange. As for FTX, which was once the only exchange posing a threat to Binance, I won’t elaborate much on the performance of its platform token. Their IEOs created numerous stories of hundredfold gains and gained them a loyal customer base. Even when they were on the verge of bankruptcy, many people remained steadfast in their support, which is why the number of victims and the amounts involved in FTX were so significant. Through the platform token, not only does it enhance external evaluations of the exchange, but it also binds those existing customers to the platform. The fact that the platform has helped them make substantial profits is more compelling than any other incentive, making them loyal users of the platform. Therefore, platform tokens are a very important means of promotion and customer cultivation. Exchanges that are unwilling to maintain the price of their platform tokens, unless they are scams, are generally considered third-rate exchanges. They only focus on short-term gains without caring about increasing their market share and cultivating loyal customers.

The mainstream view of platform currency in the bull and bear market

Some people may think it’s normal for platform tokens to be issued during bull markets and experience a decline in bear markets. In that case, I suggest considering a few things. Firstly, was the initial valuation of the platform token overly inflated? Secondly, did BNB and OKB go through multiple bull and bear markets? Did they experience bear market declines or provide initial customers with returns several times or even hundreds of times their investment? Ultimately, it comes down to how the platform views the positioning of its platform token and the token economic model it adopts. Does it aim to be a third-rate platform focused solely on short-term gains, or does it strive for long-term growth and the cultivation of a loyal customer base? By reviewing the platform tokens of each mainstream platform, you can find your own answer.

Thank you all for reading this far. If you enjoyed this type of article, please let me know so that I can create more content that you’ll like.

If you have any interesting topics you’d like to discuss, please let me know, and I’ll write an article expressing my own perspective. Until next time, take care!