Updated: Dec 20, 2019
FTX is a newly launched cryptocurrency derivatives exchange offering futures, leveraged tokens, and OTC trading. FTX Token or FTT is the inherent backbone of the FTX ecosystem. FTT holders benefit by having to pay only a fraction of the exchange fees, and a fraction of the liquidation insurance fund. They can also use the token as a collateral to get OTC spreads on FTX.
This short guide will discuss the purpose for which FTX Token is designed, the developing team behind it, the way it works, and the various uses and applications of the coin and platform.
What Is FTX Token Designed For?
FTX is designed as a cryptocurrency derivatives exchange, built by the trader for traders. The development team has strived to create a platform, powerful enough for professional trading firms to get the most out of their trade volume, and intuitive enough for beginners or first-time users.
Futures exchanges in existence today are held back by many flaws, such as crippling issues. FTX is intended to solve these problems and move the crypto derivatives space towards achieving, an institutional grade. The exchange is created to offer one of the world’s most liquid order books.
FTX has already received overwhelming support from top industry players, which has only helped in reaffirming the demand for this well-designed derivatives exchange. In the future, the FTX team is planning to add exchange-traded tokens, options, lending, and spot margin trading to the exchange.
Who Is the Team Behind FTX Token?
FTX is backed by Alameda Research, which was founded by Sam B-F. Before founding Alameda, Sam was a professional trader on Jane Street Capital’s international ETF desk, where he gained significant experience trading in a variety of ETFs, futures, currencies, and equities. This experience helped Sam design an automated OTC trading system, which addresses the foremost issues faced by traders in the industry.
Alameda Research has become the largest market maker and liquidity provider in the crypto space, within a year. They are a $100million AUM quantitative cryptocurrency trading firm.
Other members of the team come from leading Wall Street quant funds and tech companies, such as Optiver, Susquehanna, Facebook, and Google.
How Does FTX Token Work?
FTX has been one of the largest crypto futures traders for the past 1.5 years, and they have been able to set themselves a class apart from other top futures exchanges like Bitmex and Okex, by being ahead in terms of technology.
For starters, the network uses a centralized collateral pool with a universal stable coin settlement. Collateral is usually fragmented across numerous margin wallets and tokens. This makes it hard for traders to rebalance their positions later on and prevent liquidation. FTX made FTT Token be stable coin-settled to combat this issue. The token requires only a single universal margin wallet.
Socialized losses are known to claim a significant amount of customer funds, on a traditional derivatives exchange. FTT helps in significantly removing the likelihood of clawbacks, using their 3-tiered liquidation model.
FTX works to stay ahead of the competition by bringing innovative products to the industry. For instance, their leveraged tokens benefit traders by allowing them to put on a short or leveraged position, without really having to margin trade. BTC, ETH, EOS, USDT, XRP, BNB, TRX, and LEO are currently offered as leveraged tokens. Also, the LINK is soon expected to be added.
FTX is highly liquid and has gained the reputation of being the most liquid exchange in the crypto sphere. No new or existing exchange is expected to replicate the FTX model in the coming five years.
What are Current and Future Applications of FTX Token?
FTT tokens are one of the best coins in the crypto industry. It has a great team backing it, great fundamentals and great partnerships. Some of the more noteworthy partnerships include Paxos, TrustToken, USDCoin and Alameda Research.
Currently, FTT has several utility scenarios.
Token Burn – A third of all FTX fees is used towards repurchase of FTT until a minimum of 50% FTT in circulation, can be effectively burned.
Collateral – FTT is useful as collateral to maintain futures position. This is intended to increase utility and demand for the token. The same is expected to apply with margin trading.
Trading Fee Discount – Customers who hold on to their FTT for a certain time can benefit from a lower FTX fee.
FTT is expected to remain useful as FTX expands in the future. It is intended to be the backbone of the ecosystem, which will be used in numerous ways as more products and features get added.