The CEO of Binance, one of the world’s leading crypto-currency exchanges, revealed his thoughts on token economics to explain how finance works in the emerging new crypto-currency industry.
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According to the Binance blog post on July 18, Changpeng „CZ“ Zhao said it makes more sense to convert the trust currency into cryptom currencies like Bitcoin and Binance’s native token BNB. Since the conversion fee at the exchanges is substantially cheaper than what would be charged for credit cards.
Owning and burning are positive for token economy
Zhao said that if a team has its own tokens, they show more commitment to the project. Meanwhile, „buybacks“ before burning the native token only show that their token has no real use cases. He gave an example in another token matrix of exchanges that:
„Some exchanges even proudly (or brazenly) promote the fact that they ‚buy back‘ the exchange tokens before burning them. And, unfortunately, some people may believe this is a good thing. It would mean: First, they have no income from the exchange’s own token; that is, people are not using their tokens to pay fees. Or, secondly, they don’t have their own tokens that they receive. They throw them all on the market.
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Burning tokens, according to Zhao, like airdrops is good for the token economy. Because a burn has fewer transactions and fewer commissions on the network.
The red flags to pay attention to
Zhao went on to reveal some of the signs he will pay attention to when judging how successful a project’s token economy can be. The issue of multiple tokens, the small circulating supply of a token, large token holdings of the team, and changes too often in white papers are all negative signs to be aware of.
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As reported by Cointelegraph earlier, the Binance Coin price has gained almost 20% in Bitcoin in July and this means bullish for the price of the exchange’s IEO tokens.