As Tether Premium Disappears, Bitfinex and Ethfinex Launch New IEO Platform: Tokinex

Avi Rosten

Prominent exchanges Bitfinex and Ethfinex have announced a new IEO (Initial Exchange Offering) platform.

The new platform, Tokinex, allows users to participate in pre-vetted token sales from new projects listing on the site. In a departure from other similar offerings such as Binance Launchpad, token issuers on Tokinex don’t have to pay any upfront fees for listing, while successful launches on the platform will also benefit from listing on both Bitfinex and Ethfinex.

The new exchange also utilizes the KYC service from Blockpass, which allows customers to complete KYC verification but without storing data on the exchange. The first token sale will be announced on May 23rd, with the sale taking place on 13th June.

Will Harborne, founder of Ethfinex, told CryptoGlobe:

Tokinex has been several months in development, incorporating feedback, testing and learning to reach a quality level users have come to expect at Bitfinex and Ethfinex. It has been carefully crafted to put the user experience front and centre, from incorporating Block Pass for KYC that is easy to use and does not store personal data, to being able to contribute existing assets directly from the user’s own wallet, rather than having to purchase a native platform token to participate.

IEOs in 2019

This latest platform from Bitfinex adds to the growing list of IEO platforms that have followed Binance, including OKEx, Huobi and Bittrex.

For Bitfinex, the news comes in the aftermath of fraud allegations in April from the New York Attorney General against Bitfinex and Tether, over alleged losses of over $850 million. However, the Tether Risk Premium, - a measure of how much the market believes Tether to be riskier than its underlying USD - has since almost completely disappeared, suggesting that investors at the moment have little concern over Tether’s value.

This is likely due to restored investor confidence in Bitfinex and Tether, after Bitfinex CTO Paolo Ardoino revealed on May 13th that the company had raised $1 billion in a private token sale. The chart below shows the impact of the announcement - with the premium on the BTC price on the Bitfinex Exchange narrowing to zero following several weeks where bitcoin was trading above its spot price.

Bitfinex Premium Narrows

Trans-Fee-Mining Exchanges' Market Share in Decline - Report

  • TFM exchange volume down 53% in September
  • Only 32% of crypto trading volume is TFM volume

According to the latest exchange report from CryptoCompare (September), the trade volume on “trans-fee-mining” -- or transaction fee mining (TFM) -- exchanges dropped dramatically between August and September, more than halving. The overall proportion of transaction volume in the crypto markets comprised of TFM has thus declined significantly during this period.

Overall volume by fee-typeSource: CryptoCompare

Specifically, trade volume on TFM exchanges accounted for $174 billion during September, down from $375 billion during August. The more classical taker-fee exchanges, which charge a small percentage to execute a market order, typically outdo trans-fee exchanges even if only slightly. But during September, they exchanged $358 billion, up from $355 billion in August, far out-trading TFMs.

Transaction fee mining (or “mining”) occurs when users are rewarded, rather than taxed for executing orders on an exchange. Typically, exchanges allow free trades for users posting limit orders, which are orders set at a certain price. Otherwise, if users want to buy or sell immediately at whatever the current price is, they are usually charged a small fee. The rationale here is that exchanges want as many users as possible to post orders, so that order books are nice and thick (traders like liquidity).

Trouble With Trans-Fees

The TFM exchanges go one step further by rewarding all users just for trading on their exchanges, with in-house tokens. The idea is, again, to attract more traders and thus more liquidity.

In a sense, this model is the epitome of speculation, whereby users accrue large quantities of tokens betting that they will someday be worth more. Some have claimed, however, that this incentive encourages “wash trading,” an unwelcome form of market liquidity that is actually banned in traditional, regulated markets. This is when the same entity, or colluding entities, trade back and forth with each other.

In traditional markets, this is done in order to manipulate assets’ prices and set up exploitative trades. Here, the goal would be different but the effect is still undesirable: exchanges with high transaction volume but low order book depth may result in erratic price changes on cryptoassets. CryptoGlobe tackled the question last year of whether or not this sort of trading constitutes “fake volume.”

In CryptoCompare’s June 2019 Exchange Benchmark guide (pdf available here), exchanges employing the trans-mining model were generally classified as “Lower Quality,” despite volume on such exchanges rising as a percentage of the total market at the time. It seems that the trend may be shifting again.

Featured image via Pixabay.