Aug 23, 2017 · 1 min read
I’m wondering the same. I’m guessing it’s similar to Ripple where the tokens serve as a ”bridge asset” to facilitate the exchange and blockchain validation. If that’s the case then the tokens value is tied to the liquidity demand, as long as there are enough tokens available to carry out transactions there’s no reason for the value to increase. Speculators hoard tokens in the hopes that the demand increases enough that users will pay more for the tokens. Large institutions may hold tokens for quick access but I would think most transactions would look like:
- 1. Sender converts USD/BTC->Token
- 2. Sender sends tokens to recipient
- 3. Recipient converts Token->USD/BTC
This explains why Ripple trading volume is so high relative to its market cap.