With Initial Exchange Offerings being the latest trend in the cryptocurrency space, we thought it would make sense to take a look back at who the most influential crypto exchanges were over the last few years. These exchanges all had profound effects on how traders interact with cryptocurrencies as well as on the stability of the ecosystem as a whole.
For better or for worse, all of these exchanges listed below had dramatic effects on the ecosystem and how we interact with cryptocurrency today.
Binance is a global cryptocurrency exchange that provides a platform for trading over 100 cryptocurrencies. Since early 2018, It’s been considered the largest cryptocurrency exchange in the world in terms of trading volume. Binance has managed to stay ahead of regulations with the company moving its servers and headquarters out of China before the blanket government ban on cryptocurrency issued by the Chinese government in September 2017.
In July of 2017, Binance introduced their own form of digital currency on the Ethereum blockchain – the ERC-20 BNB Token – commonly referred to as the Binance Coin. It’s been one of the best performers since the bear market began in late 2018.
If users pay for transaction fees using BNB they are given a 50% discount on the fee, giving the token a solid use case and helping maintain its price stability.
At the beginning of 2018, the crypto-exchange Binance was so popular that they had to completely overhaul their system to cope with the amount of users on the platform.
The Binance Effect
Binance has had a tremendous impact on the prices of various digital assets. Throughout 2017-2018 many traders noticed the existence of the “Binance Effect,” in that when tokens were listed on the platform their prices skyrocketed. Given that the exchange had the highest trading volume this wasn’t necessarily surprising but it gave Binance enormous power in the ecosystem. This made a listing on Binance a coveted position for many up and coming cryptocurrencies.
Binance’s CEO, Changpeng Zhao, or more commonly known as CZ, has also become an incredibly influential figure in the cryptocurrency ecosystem. His opinions, predictions, and commentary have all had huge impacts on businesses and individuals alike. Just recently his condemnation of Craig Wright and choice to delist his token BSV from Binance, resulted in a price decrease of nearly 30%
Binance has contributed heavily to the development of the crypto ecosystem through various initiatives. These include Binance Labs, an incubator for new blockchain projects, The Binance Launchpad, a token launch platform for new cryptocurrencies, Binance Jersey, an exchange offering fiat-crypto trading pairs, and more!
Mt Gox: Background
Mt. Gox was a bitcoin exchange based in Shibuya, Tokyo, Japan. It was launched in July 2010. By 2014 the exchange was handling nearly 70% of all bitcoin transactions worldwide. however, by the end of February 2014, it had gone bankrupt.
Mt Gox actually stands for Magic The Gathering Online eXchange, the domain was originally set up as a site to exchange Magic The Gathering cards in a stock market like exchange by its original creator Jed McCaleb.
The victim of a massive hack, Mt. Gox lost about 740,000 bitcoins (6% of all bitcoin in existence at the time), valued at the equivalent of €460 million at the time and over $3 billion at October 2017 prices. An additional $27 million went missing from the company’s bank accounts. Although 200,000 bitcoins were eventually recovered, the remaining 650,000 have never been recovered.
The exchange was troubled from the start, and was famous for its problems processing international wire transfers for people who wanted to cash out their bitcoins. On Feb. 7, it halted bitcoin withdrawals while investigating a security flaw called transaction malleability. Bitcoin software experts said Mt. Gox’s highly customized code may have exacerbated that issue. Other bitcoin exchanges also temporarily suspended trading. With no explanation, Mt. Gox’s website went blank on Feb. 25. It filed for bankruptcy three days later, with Mark Karpelés, the CEO, accepting blame with a bow, a Japanese custom acknowledging failure.
In March 2014, Mt. Gox reported on its website that it had found 200,000 bitcoins in old-format digital wallets that had been used by the exchange prior to June 2011. These bitcoins remain held on trust for creditors while the company remains under bankruptcy protection.
Mark Karpelés was arrested in Japan in August 2015 and charged with fraud and embezzlement, although none of these charges directly relate to the theft. He was imprisoned until July 2016, when he was released on bail. He has pleaded not guilty to the charges and his trial is ongoing.
The Mt. Gox Effect
Mt. Gox’s fall had a huge impact on the cryptocurrency ecosystem. As the largest player, it’s fall left a vacancy that many exchanges wanted to fill. The Mt. Gox model has been replicated hundreds if not thousands of times (not always successfully). There are now over 208 cryptocurrency exchanges listed on coinmarketcap.com. None have come even close to holding the dominant position that Mt. Gox once held. It also had a massive effect on the price of Bitcoin causing it to drop drastically.
However, Mt. Gox also had a largely negative impact on the cryptocurrency space. Since at the time bitcoin was largely used in conjunction with The Silk Road, this hack brought even more negative attention to the crypto eco-system.
It also showed how vulnerable to cybersecurity issues many cryptocurrency exchanges truly were. Over the years we’ve seen plenty of exchanges experience issues with security & lost coins, but none have compared to what happened to Mt. Gox experienced.
The negative attention Mt. Gox received simultaneously fired up the ambitions of entrepreneurs looking to replicate their model while at the same time pushing early adopters away for fear of losing their funds in a similar incident. All in all it’s easy to see why Mt. Gox would be considered one of the most influential crypto-currency exchanges.
Kraken is a US-based cryptocurrency exchange, founded in 2011. The exchange provides cryptocurrency to fiat trading, and provides price information to Bloomberg Terminal. It is one of the oldest popular crypto exchanges, that accepts fiat currency (like the U.S. dollar), generally follows regulatory guidelines, allows you to long and short with moderate leverage, and allows you to trade several different coins it is generally a good choice for new U.S.-based investors.
In September 2013, Kraken launched after two years of testing and development. The exchange initial offered bitcoin, litecoin, and euro trades. Additional currencies and margin trading was later added.
In November 2014, Nobuaki Kobayashi, the court-appointed bankruptcy trustee overseeing the Mt. Gox liquidation, announced that Kraken was chosen to assist with the investigation of lost bitcoin and the process of returning remaining funds to creditors. According to an article in the Wall Street Journal, the trustee said that Kraken was chosen because of its proven operating history and because the company reports that its system has never been breached by hackers.
Kraken’s mission is freedom from centralized systems, financial freedom and critically, freedom from oppression. Their vision of the future doesn’t work unless it works for everyone.
Kraken was an incredibly influential exchange throughout the crypto boom of 2016-2018. Kraken acted as a sort of “rock in the storm” where traders felt safe and could easily access crypto-fiat transactions. This was a rare thing among exchanges of the time, with many undergoing hacks or losing their rights to trade in fiat currencies.
Kraken was also one of the only exchanges that offered Euro to Crypto trading pairs, which was essential in bringing cryptocurrency adoption to Europe and many other places around the world.
Kraken’s priorities in terms of safety, transparency, and stability helped make it one of the strongest exchange players in the industry and inspired new users to join in the crypto economy. While it might not be the largest exchanges it remains one of the most respected and will likely continue to be so going into the future.
Coinbase is a digital currency exchange headquartered in San Francisco, California. They broker exchanges of Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, and Litecoin with fiat currencies in approximately 32 countries, and bitcoin transactions and storage in 190 countries worldwide.
The company, has three main products according to their website.
“1. “Coinbase Consumer” (Which most people call Coinbase, it is the product found at Coinbase.com) where people can buy and sell Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and other coins using dollars in a simple way,
2. Coinbase Pro an exchange aimed at more advanced users where people can trade Bitcoin, Ethereum, Litecoin, Ethereum Classic, 0x, Basic Attention Token, and Bitcoin Cash trading Bitcoin for most of those coins or trading those coins for dollars or the crypto-based dollar substitute USDC, and
3. Coinbase Wallet a way to access Ethereum-based assets.”.
The Coinbase Effect
Coinbase is probably less of an exchange proper and more of a conservative cryptocurrency bank. It might be fair to simply label it a broker (without bids, asks, limit orders, margin trading, etc). It alone is responsible for introducing millions and millions of Americans to the wild phenomenon that is decentralized currency speculation.
Coinbase played an incredibly important role as the on-ramp to the cryptocurrency ecosystem, as it allowed users to buy crypto-currency using US dollars. During the crypto boom, many exchanges specifically restricted American users from participating due to fears of being targeted by the U.S. Securities and Exchange Commission (SEC). Coinbase allowed American traders to buy the basic cryptocurrencies (BTC, ETH, LTC) and transfer them to other exchanges where they could diversify further into different alt-coins.
Coinbase also had an effect on cryptocurrency prices similar to that of Binance. Given that Coinbase had so few trading pairs, the news that any new coin would be listed on the platform sent the price of various tokens skyrocketing. It was and still is incredibly difficult to get a token listed on Coinbase, which is why it was able to have this effect. It gave investors the impression that if a token was good enough to get on Coinbase it was worth investing in. However, this effect has diminished during the bear market in recent months.
At the time of available statistics, the Northern California broker had something like 13 million users (Altana Digital Currency Fund), some days back in 2017 they were clocked at 10 0,000 new sign ups every twenty four hours. For a little while there, Coinbase was one of the top ten most downloaded application in the Apple App Store. Its yearly revenue even eclipsed venerable legacy brokerage houses such as Charles Schwab.
FCoin is a crypto-to-crypto exchange that launched in late May, 2018. Founded by Zhang Jian, the former chief technology officer of Huobi. FCoin was famous for popularizing the business model that turned cryptocurrency trading into mining. Within two weeks, it captured the #1 spot in daily trading volume, and not even by a small margin.
Prior to launch, the exchange received investments from some of the largest investment firms in the digital asset space, including Danhua Capital, Node Capital, Singer Capital, Timestamp Capital, 8 Decimal Capital, The Zipper Fund and others.
While Fcoin was able to make a big impact last year it was a short run, with it falling out of the top spots in trading volume relatively quickly, with many completely forgetting that it had attained such heights in 2018.
The FCoin Effect:
This new business model called Trans-Fee-Mining was what made Fcoin so influential. Although Fcoin didn’t invent the model, it was the first to popularize it. The model has since been adopted by a range of other cryptocurrency exchanges, showing that the model clearly had merit, despite the negative attention it had received. Currently many of the top cryptocurrency exchanges have adopted some form of the model including, Coinbene, Bitforex, Coinsuper and others.
Fcoin’s initial model while effective at generating trade volume quickly brought a lot of attention to the platform. The initial excitement surrounding the model led to a surge in price for the token from $0.10 to $1.05 in just a few months. After the hype a massive sell-off ensued leading to the token stabilizing near its initial price.
This was largely due to claims that the volume on Fcoin wasn’t real and that it was mostly bots trading to take advantage of the trans-fee-mining model. However, the core group of Fcoin remained and has been slowly implementing changes to bring it back to the forefront of crypto exchanges.
However, in recent months Fcoin’s volume has started to pick up again due to many changes in the trans-fee-mining model. Fcoin recently created what it calls “Sustainable Mining.” Under this sustainable mining model, the amount of Ftokens to be distributed to traders on a daily basis was capped, with each trader receiving tokens proportional to the amount of trades they made on that day. The Ftokens distributed to traders were also locked for a period of 1 year.