KuCoin burst onto the scene in 2017, after four years of behind-the-scenes development. It had the goal of becoming one of the top 10 exchanges by mid-2019. While it still has some way to go, the exchange has a solid reputation, particularly among fans of its KuCoin Shares (KCS) profit sharing model. But does the KCS token stand up to DGTX? Let’s find out!
KuCoin is a cryptocurrency exchange based in Hong Kong, offering 392 trading pairs of tokens covering many of the more obscure altcoins. The KuCoin team is headed up by CEO Michael Gan, who previously worked in Ant Financial, part of the Alibaba group and the highest valued fintech company in the world.
The team had begun researching blockchain technologies all the way back in 2011 and assembled the technical architecture for KuCoin by 2013. The exchange finally launched, together with the KCS token, in September 2017.
KuCoin had a promising start, featuring in the top 20 exchanges during parts of 2018. However, KCS currently sits around #75 on CoinMarketCap. Nevertheless, it is still one of the better-known exchanges within the community.
At least so far, it’s also managed to avoid any of the negative issues that have plagued other exchanges, such as hacks or reports of falsified trading volumes.
The 2019 New Year’s announcement from Michael Gan also indicated that KuCoin will open its own derivatives trading platform during 2019.
Although there are no details currently available, based on our previous comparisons to other futures exchanges, we’re pretty sure that KuCoin’s offering won’t hold a candle to Digitex’s unique zero-fee trading model and non-custodial accounts.
KuCoin Shares (KCS) is the native token of KuCoin. Unlike Binance’s BNB token or Huobi’s HT token, KCS was baked into KuCoin from the very beginning, referenced within the first white paper. The biggest selling point of the KCS token is that holders are entitled to a daily share in the profits of the KuCoin exchange, creating ROI for investors.
Like BNB and HT, KuCoin also carries out token burns of KCS to introduce scarcity to the supply and appreciate the token. This is to the tune of 10% of net profit each quarter and continues until 100MM KCS are burned (50% of total supply).
Performance of KCS
KCS started out with a boom when the exchange launched back in 2017, but since then the overall chart looks relatively flat.
Looking at the previous three months, the price was on a steady decline from January, more than halving in price to around $0.33. It’s now started to rally, back up to $0.58 at the time of writing.
This could be attributed to the platform upgrade that happened in February. After all, the value of a token is always linked to the profitability of the exchange rather than the overall crypto market.
The upgrade was a fairly major change, and the idea of any downtime may have been worrying enough for some investors to drop their KCS positions.
Use Cases of KCS
The key selling point of KCS tokens is that token holders get access to the KuCoin bonus. Each day, the exchange distributes 50% of its trading fee profits to holders of KCS tokens.
On the surface at least, this may appear to be more generous than the approach with BNB, HT and even DGTX where ROI depends on the value of the token. However, remember that the value of the token always reflects the profits of the exchange in any case.
Furthermore, holders of KCS are likely also to be users of the exchange. So as a user, they will pay fees for trading on KuCoin, which are later returned to them under the bonus system. Compared to Digitex’s zero-fee exchange, which can only be accessed by DGTX token holders, the KCS bonus model appears somewhat convoluted.
Conversely, there could be a scenario where KCS holders are not regular users of the KuCoin exchange but will profit from those who are users. The KCS bonus actually risks putting the interests of token holders ahead of those actively using the exchange.
To be eligible for the bonus, the KCS tokens must be held in the users KuCoin exchange account. Therefore, users risk leaving their funds on a centralized exchange. While KuCoin hasn’t suffered any security incidents so far, centralized exchanges are prime targets for hackers.
DGTX token holders will benefit from decentralized account balances when the Plasma implementation goes live in Q3. This means users have complete control over their own private keys, alleviating any of the concerns about funds left on centralized exchanges.
Discounted Trading Fees
Like BNB, those HODLing KCS tokens are entitled to a discount on KuCoin exchange fees. The fee discount is calculated based on the number of KCS the user is holding.
Again, it can be taken as generous that KuCoin offers trading fee discounts and a bonus structure. However, this further underlines the potential divide between “exchange users” and “token holders.” Unlike Digitex, where our token holders are exactly the same group as our users.
“Higher-ranking” KCS holders will be eligible for one-on-one consultation services for investment strategies and expedited customer service. It isn’t clear what qualifies as “higher-ranking,” but we could assume it’s those holding the most KCS tokens. Therefore, with KCS, it apparently pays to be a whale.
At Digitex, we are taking active steps to deter whales from scooping up volumes of DGTX tokens, as we believe they have undue influence over the market. We want to protect the price of Digitex from mass sell-offs, as it risks the ROI for our users.
KCS owners will also be eligible for future participation in the decentralized exchange that KuCoin is apparently developing. These future benefits are as yet unspecified.
DGTX vs KCS
KCS can easily differentiate itself from other exchange tokens due to the bonus structure, whereas BNB and HT holders get trading fee discounts. However, the KCS bonus structure cannot compete with Digitex’s zero-fee trading model.
Not only is the KCS bonus a convoluted way for a trader to get their own money spent in trading fees back, but the bonus also doesn’t even act as an incentive for traders, because anyone can own it whether they use the exchange or not.
Furthermore, the fact that anyone can buy KCS and take profits without using the exchange serves to create divergent interests of the exchange users, and the token holders. Token holders want higher fees to get a better return, whereas users want lower fees.
This conflict really underlines how Digitex’s zero-fee exchange, only accessible to holders of the DGTX token, brings harmony to the interests of users and the exchange itself. Our users want zero-fees so they’ll invest in DGTX to maximize trading profits. Increasing our user base is what drives the value of the DGTX token and thus ROI for our users.
Wrapping it Up
KuCoin has made some impressive strides in its first 18 months of trading considering that the exchange market now is more competitive than ever before. The company also has some interesting projects in the pipeline, such as the decentralized exchange and derivatives markets opening up. We will be keeping an eye on KuCoin this year, for sure.
However, the public launch on 30th April is our current number one priority! If you’re not yet on our waitlist, join the one million people who are by signing up now! You can also join the conversation on our Telegram group.