XYO and the Blockchain Transparency Institute: Telling the Real Story Token Exchange Volume
Before we even entered our very first token exchange, we began doing intense research on how we could do right by our HODLers and general community. There was a lot to think about, and we added all the questions and guidelines and qualifiers to our Intelligent Exchange Strategy (IES).
From the get-go, we realized we had to have the most accurate information available. Why? Because it’s a token jungle out there, and not every exchange is on the up-and-up.
What we really wanted to avoid was wash trading.
If you’re just hearing about wash trading or not sure how it works, here’s the rundown:
Like any other type of trading (stocks, for instance), activity is the biggest way to show that people are hyped up about a coin or blockchain project. When people are buying and selling a token like mad, it tells potential traders that the community is engaged and the coin is hot.
Soon FOMO sets in. The excitement is contagious. So the potential traders become real traders, bringing even more activity.
The same thing goes with exchanges. When an exchange shows a lot of trading activity, people tend to gravitate toward it. The FOMO builds. The excitement is contagious. “I want to buy and sell on an exchange where not a single trade has taken place in the last 6 hours”, said no one ever.
But some of the time, this trading activity doesn’t happen naturally. Sometimes there just aren’t enough people trading tokens. So the exchange might start paying professionals to buy and sell tokens all day, or they might set up automated bots to do the same, to create the illusion of real activity.
This is called wash trading.
Now when potential traders visit the exchange, they see all this activity and believe these wash trades are real trades. So they trade too, bringing up the activity level.
All of this activity boils down to one number: Volume.
Volume is the value of the tokens that change hands over a certain amount of time. Usually this time measurement is 24 hours.
But it is also the number that’s used to rank exchanges for traders, so it’s a VERY important number. Higher volume = more traders (at least in a perfect world).
Up until recently, it was very difficult to figure out this number. It was very hard to distinguish which trades were real, and which trades were just tokens being bounced back and forth between bots and wash traders.
Then the Blockchain Transparency Institute (BTI) was founded. And they cracked the code.
BTI has assembled a team of experts and a small army of data research partners to figure out this number. They’ve already uncovered that half — HALF — of daily trading volume of the entire cryptocurrency market is made up of wash trading.
Smoke? Meet mirror.
Even some of the biggest exchanges engage in wash trading. This is why we’re partnering with BTI as trusted advisors for our Intelligent Exchange Strategy.
This is not a partnership that developed overnight. Our backwards hat-wearing leader, Scott Scheper, is a huge fan of the BTI team, and the work they do. There have been phone calls and in-depth discussions galore. And we’re so happy to finally make this announcement.
We’ve seen BTI’s plan for 2019, and even though we can’t reveal it here, we’re excited about the direction they’re going. This is a partnership that could chart our exchange course moving forward, and we’re proud to have the brilliant and talented BTI team on our side!