The concept of exchange tokens first emerged in 2017, gained momentum as a major trend in 2018, and exploded in popularity throughout 2019 with the rise of IEOs and token buybacks. These tokens have proven to be resilient during bear markets and leading performers during bull runs, establishing themselves as significant assets alongside major cryptocurrencies.
Beyond the well-known exchange tokens like BNB, HT, and OKB issued by industry giants, smaller exchanges have also seen their tokens, such as MX and BIKI, ride the wave of the recent market upturn. The gains have been substantial—ranging from severalfold increases to astronomical surges—allowing many of these smaller platforms to break into the mainstream as dark horses in the crypto space.
But what strategies and innovative tactics are driving this collective surge in exchange tokens? And how are emerging exchanges managing to stand out in an increasingly crowded field?
Trading Mining Ignites the First Wave
Initially, exchange tokens were designed primarily as utility tokens with limited speculative appeal. They were commonly used for community governance, transaction fee discounts, voting rights, and profit-sharing incentives. The primary methods for increasing their value included fee discounts, governance rewards, and buyback programs. These foundational use cases provided the initial pathways for token appreciation.
Among major exchanges, Binance was not only the first to launch a platform token but also pioneered tiered fee structures. Users paying with BNB receive annually decreasing discounts, with additional benefits for those who hold or trade larger amounts of the token. Similarly, Huobi and KuCoin offer layered discounts for users transacting with their native tokens.
Almost every exchange also implements some form of dividend distribution or buyback mechanism for token holders. Another common application is granting governance and voting rights for new token listings.
Beyond these established practices, the emergence of Fcoin introduced a groundbreaking model that captivated the crypto community during a bear market: trading mining.
Fcoin dramatically increased profit-sharing and mining incentives. On June 6 of last year, the platform announced that 80% of its revenue would be distributed to FT token holders. It also launched a "mining income multiplier plan," which generously refunded transaction fees to miners and offered referral rewards for bringing in new users.
These aggressive incentives, combined with the trading mining and profit-sharing model, proved highly effective at attracting users. Miners and traders flocked to the platform, making Fcoin an overnight sensation and injecting excitement into a sluggish market. The price of FT, Fcoin’s native token, surged by over 700% during this period. Within just 15 days of its launch, Fcoin topped exchange volume rankings.
This success prompted numerous other exchanges to adopt similar models. Huobi rebranded its "Huobi Global Points" as "Huobi Global Ecological Token" and incorporated trading mining and profit-sharing. OKEx launched its "Open Exchange Partnership Program," which resulted in a 35% intraday surge for OKB.
However, the excitement was short-lived. Relying on subsidies, rebates, and aggressive user acquisition proved unsustainable for Fcoin. As the price of FT continued to decline and new projects on its innovation board suffered severe losses, Fcoin’s momentum faded—and with it, the popularity of trading mining.
IEOs Usher in a New Bull Market
Months after trading mining faded, Initial Exchange Offerings (IEOs) reignited market enthusiasm.
In January of this year, Binance relaunched its Launchpad platform, marking the beginning of a new trend. The success of projects like BTT and the subsequent surge in BNB’s value prompted other exchanges to follow suit.
Huobi introduced Huobi Prime, OKEx launched OK Jumpstart, and Gate.io unveiled Startup. KuCoin and others soon joined with their own IEO platforms.
According to incomplete statistics from ICObench, 158 projects were launched on various IEO platforms in the first half of 2019, raising a total of $1.428 billion. However, opinions on IEOs were divided. Some exchanges presented them as a way to offer users access to high-quality projects, while critics argued that they were merely a new way to exploit retail investors.
Regardless, exchange tokens emerged as clear winners. In the IEO model, these tokens became both the fuel and the entry ticket for participation. For example, holding 200,000 MX tokens was required to participate in the first IEO launch on MXC Labs.
Many investors concluded that rather than investing in IEO projects directly, it was more profitable to invest in the exchange tokens themselves.
Still, the IEO trend was not without controversy. Some exchanges tarnished the model’s reputation—for instance, Gate.io was accused of market manipulation with the CNNS project, and Bibox faced public conflict with the SKR project team over financial disputes.
As hype, gimmicks, and commercial interests took over, IEOs began to deviate from their original purpose. Instead of fostering innovation, they often became vehicles for speculation and even disguised ICOs. With growing scandals and an increasing number of projects falling below their offering price shortly after launch, interest in IEOs declined sharply in the second quarter.
Data from Inwara showed that as the number of IEOs grew from March onward, post-listing premiums decreased, and failure rates increased. After peaking in May, fundraising via IEOs also declined. According to Coinschedule, IEO fundraising reached a record $1.1 billion in May but dropped to just $100 million in June—even lower than April’s total.
As the IEO trend waned, a new wave of buyback programs began to take center stage.
The Buyback frenzy
Although token buyback mechanisms were first introduced in 2017, they gained significant traction in 2019, especially during the second quarter. Both large and small exchanges began announcing buyback programs in rapid succession.
The most common approach involves exchanges using a portion of their profits, revenue, or transaction fees to repurchase their tokens from the market. This reduces the total circulating supply, creating deflationary pressure and potentially driving up the token’s value. Smaller exchanges like MXC, BIKI, and BEEX were particularly aggressive, often allocating up to 70% of their transaction fee income to buybacks.
Among the eight exchanges analyzed, Binance and KuCoin were early adopters of buyback mechanisms, establishing clear rules for token burns as early as 2017.
In 2019, more exchanges joined the trend. While buybacks were sometimes used as marketing tools, they undeniably contributed to token appreciation.
For example, when MXC Exchange increased its buyback commitment from 40% to 100% of transaction fees on July 1, the price of MX surged by over 10% the following day.
Binance has conducted eight separate buybacks since January 2018, burning a total of $270 million worth of BNB. Because these burns are predictable and typically occur mid-month, BNB often experiences a 15% or greater price increase leading up to each event.
However, not all exchanges embraced this strategy. The Chief Product Officer of Gate.io once publicly stated that buybacks are not a sustainable way to increase token value, arguing that treating platform tokens as securities through buybacks could lead to regulatory challenges in many countries.
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How Smaller Exchanges Are Standing Out
In a market dominated by giants like Binance, Huobi, and OKEx, smaller exchanges struggled to capture significant market share. Conventional strategies like buybacks, profit-sharing, and trading mining were not enough to differentiate them.
Nevertheless, several smaller exchanges managed to break through by adopting unique and sometimes unconventional approaches. Throughout 2019, platforms like MXC, BIKI, and BEKX gained traction and led a new wave of interest in emerging exchanges.
These platforms often targeted underserved markets, listed speculative tokens, and capitalized on trending assets to attract users.
While larger exchanges focused on compliance and established tokens, smaller exchanges identified and filled a demand for high-risk, high-reward investments. For example, BIKI listed VDS on April 12 and quickly followed up with another resonant token, FDS, on April 15. In May alone, BIKI’s token surged by 1,000%. Similarly, MXC saw its token double in value within a week after listing several resonant tokens starting in March.
These exchanges were not only bold in their listings but also incredibly frequent. Several newer platforms listed over 100 tokens, rapidly catching up with more established competitors. BIKI, dubbed the "listing mania," added new projects every two to three days. MXC earned labels like "altcoin hub" and "MXC casino" for its aggressive listing strategy.
These exchanges also positioned themselves as "star token discoverers," launching initiatives like " hunting for 100x tokens" and competing with larger exchanges for hot listings.
Although criticized for prioritizing traffic over project quality, these platforms leveraged the allure of rapid gains to attract users, increase trading volume, and boost the value of their native tokens.
Some introduced additional innovations, such as MXC’s "Million Dollar Trading Competition," which helped MX reach an all-time high. BEKE launched the first On-Chain Asset (OCA) section, promoting the tokenization of physical assets.
Building Ecosystems: More Than Just an Exchange
Major exchanges are expanding their ecosystems beyond trading, venturing into areas like research, charitable funds, project incubation, and asset issuance. These efforts create additional use cases for their tokens, which in turn can drive value appreciation.
Binance has been a leader in this regard. By March 17, 2019, BNB was already accepted across 56 different application scenarios—including payments, travel, entertainment, shopping, and storage—with 31 already operational.
In June 2018, Huobi Group initiated an upgrade for HT, transforming it from "Huobi Global Points" to "Huobi Global Ecological Token." The company announced investments in over 20 blockchain businesses, including exchanges, media platforms, wallets, mining pools, incubators, and asset management firms.
Huobi also plans to issue subsidiary tokens based on HT across its various business lines. Other exchanges are following a similar playbook, building their own "ecological empires" with platform tokens serving as the primary medium of exchange.
Conclusion
From tiered fee discounts and trading mining to IEOs and buyback programs, the rise of exchange tokens has largely been fueled by innovative exchange policies. The question remains: how long can this momentum last if exchanges run out of new ideas?
Additionally, the fate of exchange tokens is deeply tied to the platforms that issue them. Just as large exchanges dominate the market, tokens like BNB, HT, and OKB continue to lead, even as dark horses occasionally emerge.
Finally, what began as utility tokens have evolved into traded products and speculative instruments. Whether this is positive or negative is open to debate, but one thing is clear: exchanges are leveraging token appreciation to strengthen their market positions.
Frequently Asked Questions
What are exchange tokens?
Exchange tokens are native digital assets issued by cryptocurrency exchanges. They often provide holders with benefits such as reduced trading fees, voting rights, and participation in exclusive events like token sales.
How do buybacks increase token value?
Buybacks reduce the circulating supply of a token, creating scarcity. If demand remains constant or increases, this can lead to price appreciation. Many exchanges use a portion of their profits to buy back and burn tokens regularly.
What risks are associated with investing in exchange tokens?
Exchange tokens are subject to market volatility, regulatory changes, and platform-specific risks. Their value is closely tied to the success and reputation of the issuing exchange, making them vulnerable to operational issues or loss of user trust.
Can small exchange tokens compete with major platforms?
While smaller exchanges have occasionally achieved rapid growth through aggressive strategies, major platforms like Binance and Huobi have more established ecosystems, greater liquidity, and stronger market presence, making it challenging for newcomers to compete long-term.
What is an IEO?
An Initial Exchange Offering (IEO) is a fundraising event conducted on a cryptocurrency exchange. The exchange acts as a facilitator, conducting due diligence and offering the project’s tokens directly to its user base.
How do trading mining models work?
Trading mining rewards users with exchange tokens based on their trading activity. This model incentivizes liquidity and user engagement but can be unsustainable if not carefully balanced with long-term value creation.