(2/100) Crypto Countdown: Huobi
Next up in the Crypto Countdown series, we have a very simple to understand post on the Huobi token. Currently sitting down at #63 on Coinmarketcap, it flies completely under the radar, except to those who use it!
The Huobi token was created by the team behind Huobi, an international online platform that lets individuals trade their cryptocurrencies. In the same way that we might buy/sell stocks and shares, Huobi is one of many exchanges that allows people to do the same with crypto related assets. This type of centrally controlled exchange is pretty popular as it allows users to buy-into the world of cryptocurrency with their own dollars, euros, pounds (also known as fiat money).
What is a token?
There are a number of definitions in the blockchain space for the word “token.” In this instance, the Huobi token can best be described as a member’s-only card that gives the holders access to some cool perks. Using very similar terminology, by holding Huobi tokens in your “wallet” (cryptocurrency bank account that is not controlled by a bank), you qualify for a number of benefits that non-holders cannot access.
What is the aim of the Huobi token?
Huobi is a fully fledged cryptocurrency exchange in its own right and doesn’t actually need a token. Similarly to traditional exchanges or brokers, Huobi generates profits by charging 0.2% fees on any transactions on its platform. Thus, if you make a number of trades amounting to $10,000 you will end up paying transaction fees of $20. Whilst this does not seem like a lot, for frequent traders, these fees can easily make a dent.
However, by introducing a token into the mix, Huobi can incentivise traders by offering a series of benefits when they hold/spend Huobi tokens.
Delving into a bit more detail on 3 of these incentives, we can see how the token is designed to appeal to traders and professional investors:
Huobi VIP: or, more simply, a transaction fee discount. Based on 5 VIP tiers (ranging from 120 tokens to 12,000 tokens per month) you can enjoy a 10–50% discount on transaction fees. It is not clear-cut as to whether the discounts are worth the price- it differs on a case by case basis, depending on how often the user trades.
Liquidity protection: Huobi regularly buys back 20% of their own tokens with their own profits. The logic here is to maintain a backup supply of tokens in case of emergency and the need to compensate for user losses. These funds are converted into a cryptocurrency that does not fluctuate in price (it is effectively linked to the dollar).
HT exclusive events: It does what is says on the tin — gets you invited to exclusive events — and highlights the point that the Huobi token acts like a member’s only card!
Providing incentives to frequent traders is a clever model. Whilst it might seem slightly counterintuitive to offer a way for traders to avoid paying fees, as you can see by the Huobi token market cap, the more popular their token becomes, the greater value it has on the market.
There really isn’t that much more to say about the Huobi token! The core project of Huobi is their exchange and the token merely acts as a VIP ticket to incentive users of their platform. This is a model that is similarly operated by other exchanges like Binance — see Binance BNB coin.