One of the most exciting Exchange Tokens/Coins that I have ever known is the token of the FTX exchange (known as FTT). Although it was established in a short time ( as of 2019), FTX has gradually become one of the new names. Most likely, it will be on the list of the top cryptocurrency exchanges between 2021 and 2022.
So what is the potential of FTT, and what are your expectations for the future of FTX exchange? Let’s read the below review together:
1. FTX Overview
FTT is the token of FTX exchange, which was introduced to help the FTX exchange increase the influence of the FTX ecosystem.
Launched in 2019, FTX is currently climbing rapidly to No. 5 on Coinmarketcap’s Cryptocurrency Derivatives Exchanges Ranking. FTX and FTT are backed by Alameda Research, one of the leading Market Making/Trading companies in the crypto market.
As FTX is an exchange specializing in derivatives, it can leverage all projects listed on its platform. More precisely, FTX also has its Leveraged Tokens that everyone can apply leverage. For instance, they introduce a “TRUMP” token for those who want to “bet” for him to win the US presidential election in 2020. If Mr Trump wins, this token will rise and vice versa.
That sounds interesting. So what is so special about FTX, and why should we pay attention to FTT – the exchange’s token?
Currently, cryptocurrency exchanges are facing a problem that does not exist in the traditional Futures market. Sometimes, to ensure the exchange's liquidity, some traders will have to sacrifice their profits when the market fluctuates sharply. It happens especially when some traders' accounts are too liquid.
One of the most well-known examples is the OKEx derivatives exchange. In August 2018, a trader had accumulated a Bitcoin futures position worth more than US$400 million. When the exchange caught on, they required the trader to lower their leverage but were refused. The exchange was forced to liquidate the entire position, resulting in a loss of approximately $27 million.
It happens with most traditional markets as they allow Banks to act as liquidators and risk guarantee for both traders and exchanges. In Crypto, Banks should not exist.
As a result, Alameda Research introduced FTX to solve the above problem.
4. FTX solutions.
In response to the above issue, FTX has three steps to liquidate orders.
First of all, if the order reaches the liquidation level, FTX will carefully close the position and carefully check whether the order is dangerous for the exchange.
After that, FTX has its liquidity program (possibly provided by Alameda Research) to provide liquidity to accounts that may go bankrupt (unlike liquid, bankruptcy refers to the overwhelming negative amount in the account balance, jeopardizing both exchanges and the market).
Finally, they will use insurance funds to ensure that users do not lose, similar to other exchanges that use insurance funds. The difference here is that FTX will intervene early on so that the account does not burn out too quickly, like in the example mentioned above.
5. Market size (compared to its same domain)
Due to its derivatives trading activities, FTX has a relatively large market. However, it must also compete simultaneously with many competitors. Although it has just been established for more than a year, FTX's current transaction volume has reached US$500 million per day, ranking 5th in the Coinmarketcap. It can be compared with Bybit - another derivatives exchange founded in 2018, with a daily trading volume of US $600 million, and it currently ranks among the top three in CMC.
The growth rate of FTX is relatively fast. If they can handle their problems well, their growth is expected to be even quicker in the future.
7. The key product of the project or MVP.
With FTX and FTT, if the trading volume and users of this exchange increase, the value of FTT will rise.
FTX has vital strategies to attract users, including unique derivative products, the IEO platform, and FTT.
7.1 Special derivatives products
One of FTX's most innovative derivative products is its Leveraged Tokens. Have you heard of BTCBULL, BTCBEAR, or currently, BTCUP and BTCDOWN on Binance? It is a product developed by FTX. These tokens essentially represent the user's leverage, usually worth x3. For example, do you want to long BTC? You can buy BTCBULL instead of longing x3. When BTC increases by 1%, you will get 3%, similar to a long BTC x3.
Furthermore, to attract users, FTX has many excellent derivative indices or leveraged pairs. For example, they have the Defi index, the collective index of all DeFi, even before Binance released them. This DeFi index is calculated based on the price of the entire Defi coin. When the Defi coin rises, the Defi index rises, and vice versa.
Although it has made so many improvements, I found that FTX products face a relatively big problem, which is an unfriendly experience for new users. The motto of FTX is "By traders, for traders", therefore it seems that their experience will be more friendly to skilled traders than to the general public like Binance. With FTX and FTT, if the trading volume and users of this exchange increase, the value of FTT will rise.
FTX has vital strategies to attract users, including unique derivative products, the IEO platform, and FTT.
7.2 IEO on the FTX platform.
Similar to Binance, FTX also has IEO on its platform. SRM, Hedget, Upbots ... are their IEO.
Most IEO tokens on FTX are assessed and invested by Alameda Research. Like Binance, to buy IEO on FTX, users must use FTT.
7.3 What is FTX Token (FTT)? Token Utility
FTT tokens were created for use in the FTX exchange. It is an ERC20 token and operates as the mainstay of the exchange ecosystem. It has an impressive application in exchange operations.
FTT has many similarities with Binance, Huobi or OKEx Exchange tokens/coins. It helped FTT attract the attention of many investors because exchange tokens/coins have been growing steadily over the years.
Some utility of holding FTT can be called as follows:
- Reduce transaction costs: One of the indispensable uses of any exchange token/coin is to reduce trading costs. Of course, FTT is the same, encouraging traders to buy FTT tokens to facilitate the transaction fees they must pay. Trading fees are discounted from 3% to 60%, depending on how many they hold.
- Socialized Gains: In the event of excessive market volatility, one of the ways that brokers avoid clawbacks is to establish an insurance account to protect traders. FTX even introduced a rule according to which if their insurance fund grows substantially, any FTT holder at that time will receive a bonus from the excess insurance fund.
- Token Burns: This is a way for FTX to control the supply to increase the price of FTT. FTX uses 1/3 of the fees generated by the exchange to redeem FTT tokens and burn or destroy them. FTX stated that it would keep doing this until 50% of all generated FTT is burned.
- White Label Solutions: This is a method of generating additional income by selling or renting your product framework to others. In this circumstance, FTX will allow companies to use FTT Token to create tokens. FTX stated that they see other companies are interested in the White Label Solutions of FTX and OTC exchanges in the future. Although it does not seem to affect FTT tokens, it is entirely possible. FTX revealed that if they provide a White Label Solution, FTT will become one of the payment options. They are likely to offer some discount for White Label purchases made through FTT. If White Label Solutions become popular, this may significantly increase the demand for FTT.
- OTC Rebates: FTX is one of the largest cryptocurrency exchanges globally, with a reported trading volume of over US $ 500 million. However, thanks to the cooperation with Alameda Research, they can also provide an over-the-counter (OTC) service. Many investors and traders who do not want their transactions to affect market prices use this platform. According to the official FTT report, OTC traders will get rebates if they hold enough FTT.
- Collateral: FTT can be used as collateral on the trading platform. If FTX offers some future incentives to use FTT as collateral instead of other assets like Bitcoin or Tether, this may increase demand.
- Future plans: FTX announced plans to launch a spot trading platform in the future; however, there is no expected date yet. They also stated that the spot trading platform might also lead to an IEO platform similar to Binance Launchpad. Since FTT will almost certainly be used to make purchases on this platform, we expect that the demand for FTT will increase once it is implemented.
8. Roadmap, updates, and business development.
There is currently no roadmap for FTX and FTT.
9. Commercial partnership and business development progress.
10. Economics and supply like token release schedule, token governance and use of funds, token ecosystem.
The total supply of FTT is 350,000,000 tokens. However, as reported in the white paper, this total supply will be burned based on users' revenue and transaction fees when trading on FTX.
More particularly, the FTX team will repurchase and destroy:
- 33% of user transaction fees on FTX.
- 10% of insurance funds
- 5% operation fees on the FTX platform (IEO, listed...).
FTX equipment will burn until the total supply reaches 175 million tokens (50% of the original supply). It causes the values of FTT and FTX to remain relatively high over time. As of this writing, FTT is currently priced at US$3.6, and its current market value is about US$320 million. So far, more than 6 million FTT have been burned. There is currently no roadmap for FTX and FTT.
FTX CEO Sam Bankman-Fried is one of the hottest names in the crypto community. Not only has he been involved in many new cryptocurrency fields such as DeFi or NFT, but SBF is also better known in the community after SUSHI-related dramas. SBF saved the entire SUSHI SWAP project from a relatively strong dump. SBF has a degree in physics from MIT as well as trading experience with Jane Street Capital.
The project's CTO, Gary Wang, was a software engineer at Google. He studied mathematics at MIT before moving to FTX and working for Alameda Research. Before founding FTX, Gary Wang was responsible for engineering in the aviation department. Currently, as CTO, Gary Wang has built the entire technical system for FTX.
The general advisor of the project is Mr Dan Friedberg, who has extensive experience in payments and Crypto. Previously, he led the Cryptocurrency Application division of Fenwick & West LLP and was the president of the Payment Systems group. Dan has an MBA from the University of Wisconsin.
In addition, FTX is supported by one of the largest crypto trading companies, Alameda Research, with a daily trading volume of US$600 million - US$1 billion. Presently, they are still at the top of Bitmex's trading volume.
The FTT is one of the exchange tokens/coins that we must pay close attention to during 2021-2022. As far as I know, FTX faces two big problems; namely, UI and UX are not suitable for the community, and the marketing is not appealing. However, this can be improved in the future
As it is backed by a relatively strong team and is developing very fast, I believe FTX will continue to grow in the future. It also means that the FTT will rise accordingly. Regardless of whether it is an uptrend or a downtrend, exchanges will always be the most profitable project in the field of cryptocurrencies. Therefore, FTT currently has a relatively bright future.