How crypto exchanges became little empires
Cryptocurrency exchanges are raking in billions. The leading exchanges are taking advantage of the gold rush to aggressively expand. Their continued success depends on a supply of new entrants into the cryptocurrency markets, which explains why exchanges are paying lip service to the ICO market, launching financial products like indexes, and charging astronomical listing fees for the companies who are silly enough to heed the ICO call so late in the game. And, of course, these exchanges are making vertical acquisitions.
In the latest effort to further increase their presence, both Binance and Huobi have followed in Coinbase's footsteps, announcing large-scale blockchain investment funds (see stories below). Interestingly, the Binance fund will be making investments through the exchange's own BNB token. The new "Huobi 10" Index is weighed with 26 percent of the exchange's native token, HT (see story below). Some blockchain teams (such as Komodo) operate their own decentralized exchanges; the wallet-makers and exchange operators appear to be converging. When markets dive, will these teams sit calmly and collect their trading fees? Or will they attempt to prop up their own tokens in the hopes of outlasting their competitors?
"Binance will pour in the $1 billion over 10 phases of $100 million each and, in essence, will create a combination of a fund of funds (a fund that invests in other funds) and a direct fund that invests in blockchain projects."
"South Korean banks including Korea Development Bank and Industrial Bank Of Korea will be investing in the fund as limited partners. The fund is targeting 100 billion Korean won (US$93 million), according to an announcement."
"Needless to say, the inclusion of HT tokens within the index is highly positive for the growth of Huobi’s native token as the token will grow in the same direction as the exchange due to the law of demand and supply, with the team having stated many times that they plan to increase the utility of HT tokens in the future."
"It’s an approach that’s possible because Paradex is built on another protocol called 0X, which is a kind of open-source toolkit for people to build decentralized exchanges on ethereum. Ethereum may be mostly known for being the second-most-valuable cryptocurrency, but it also allows users to program applications on it, giving rise to decentralized apps like CryptoKitties or, indeed, token exchanges."
"The company launched in 2007 as a commodities trading platform, nearly two years before the bitcoin Genesis block ushered in a new era for finance. However, the firm was an early adopter of bitcoin derivatives, and it has become a high-volume cryptocurrency trading venue since adding more cryptocurrency-related products last February."
"Bittrex, which supports over 200 cryptocurrencies and reportedly has over 3 mln customers worldwide, will cooperate with New-York based Signature Bank to launch fiat trading for Bitcoin (BTC), Tether and TrueUSD."
"The regulator’s new orders have been issued to twelve crypto exchanges in total, two of which are officially licensed exchanges and ten of which are ‘quasi-operators,’ meaning that their application for an FSA operating license is still pending."
News & Commentary
"Earlier this week, major China-based internet security firm Qihoo 360 informed Block.one that the protocol had a 'series of epic vulnerabilities' that made its nodes susceptible to attackers. Developers fixed the bug on the same day, and Block.one CTO Daniel Larimer subsequently announced a 'bug bounty' on Twitter, offering $10,000 for major finds."
"That’s down by around 400,000 eth in combination and sure enough Santiment data shows EOS has now spent 1.75 million eth in the past 30 days, up from around 1.3 million just a few days ago."
"The internet was meant to be a decentralized communication network, with many competing providers for basic services like email, hosting and applications. But some internet service providers achieved economies of scale that made it advantageous for them to own, store and control the information being communicated."