BNB vs DGTX — A Utility Token Comparison
Everyone’s heard of Binance, the world’s biggest exchange by trading volume. It’s quite astonishing the position it’s reached to dominate the market when you consider that the Binance ICO was held just last year. In fact, the ICO of BNB (Binance’s native coin) was one of the most successful of 2017 and with reason--they went on to build the now Malta-based game-changing exchange.
With such blockchain companies already making history, the team at Digitex and all our community are anxious for the Beta launch of the futures exchange on January 15. But how does the BNB token work compared to the DGTX? What are the similarities and differences of the Binance exchange compared to Digitex Futures? And what kind of potential are we talking about for 2019 and beyond?
Here we take a look at the basics of both exchanges’ native coins and reach a few possible conclusions.
What Is the BNB Token Used for?
BNB is the native token of Binance and is built into the exchange with the goal of increasing token demand. This is done by the exchange encouraging users to pay their trading fees in BNB on the platform.
To take that extra step and pay in BNB, traders are given a discount--as much as 50 percent in the first year of operating but now reduced to 25 percent--still a significant incentive.
This discount, like the supply, will decrease over time to 12.5 percent and 6.25 percent in years three and four. After that, there will no longer be any discount. Binance already charges some of the cheapest fees in the industry at 0.1%, but the added incentive of the discount encourages users to purchase and hold BNB, which maintains a constant demand. As the discount decreases so does the theoretical value of BNB.
Moreover, when Binance launches its fully decentralized exchange, the token needed for trading fees will be the BNB. It’s a very smart move from founder Changpeng Zhao, who did a brief stint as OKCoin’s CTO before leaving to set up the exchange that would knock them (well, OKEx) off the top trading volume spot.
BNB isn’t just used for paying trading fees on the platform either. BNB holders can use the token to invest in ICOs on the platform’s launchpad. If you hold over 500 BNB and trade large volumes you can reduce your trading fees further.
BNB’s Use Has Grown Over Time
Beyond internal use in the Binance exchange, the BNB token can be used for the payment of certain goods and services, such as XcelTrip for reserving hotels and even high street goods in some places.
Given the scarcity of the BNB supply and the fact that BNB displays considerably lower volatility than most altcoins, it seems particularly suitable to be used as a payment method.
According to a report by eToro, some people even use BNB as a stablecoin.
Just like DGTX, it is based on the Ethereum network, although BNB is an ERC20 token while Digitex is ERC223.
The Characteristics of BNB
BNB is a clear utility token since it is used for paying fees, goods, and services. However, according to the same report, it may have some elements of a security token as well.
Since the value of the BNB is directly tied to Binance’s performance, this could lead to BNB’s classification of a security or asset token. Moreover, the token burns that ultimately boost BNB’s value further can be compared to share buyback programs that can be seen in stocks.
There is a maximum supply of 190,799,315 BNB, of which some 130,799,315 BNB is currently circulating. BNB has a current market cap of $675 million.
[caption id="attachment_1710" align="alignnone" width="727"] BNB Chart[/caption]
Not only does BNB have a maximum supply, like Bitcoin, but it is also a deflationary asset. The supply decreases over time as the Binance team performs routine burns of the cryptocurrency.
The BNB ICO
The BNB ICO took place in July 2017 and the allocation was as such:
- 10% BNB were offered to angel investors
- 50% BNB offered to ICO investors
- 40%(!) Held back for the founding team
When you consider that the DGTX allocation apportioned just 10% for the founding team, 40% certainly seems steep.
What Is the DGTX Token Used For?
Digitex Futures is a commission-free futures trading exchange. Those two aspects right there mark significant differences from Binance, which offers spot trading and charges fees.
Another difference between the two coins is that use of DGTX is compulsory on the Digitex Futures Exchange whereas use of BNB is voluntary on Binance.
However, just like BNB, DGTX is a clear utility token since it is necessary for all transactions on the exchange.
All traders using Digitex Futures will need to purchase DGTX in order to carry out trades. This will increase the demand for the token, ensure liquidity, and also boost the token’s value.
One of the main reasons that Binance relocated to Malta was because the Maltese government recognizes the valuable distinction between utility and security tokens, and also that a token can be a hybrid as well.
While Digitex is still sustaining talks with Maltese regulators, it’s certainly possible that the futures exchange will also look to relocate to this blockchain-friendly EU territory.
DGTX Usage Over Time
With so many plans in the pipeline for Digitex Futures, including spot trading, the addition of further futures trading pairs, a mobile app, as well as plenty of plans we can’t announce yet, it’s possible that DGTX will also be used as a method of payment for goods and services.
With the unprecedented success of Binance and BNB, there are plenty of ways that DGTX usage could evolve over time. For now, though, that’s purely speculation.
The Characteristics of DGTX
Digitex minted a total of 1 billion (1,000,000,000) DGTX for its ICO. Of these, there is a circulating supply currently of 731,250,000 DGTX and a market cap of $28,683,702 USD at the time of writing.
Unlike BNB, DGTX adopts an inflationary model, not deflationary. But on the flipside of that, use of DGTX is compulsory which increases demand and use of BNB is voluntary. By democratic voting (Decentralized Governance by Blockchain) DGTX owners will vote on how many new tokens to create each year to cover operational costs.
This periodic minting may cause a temporary decrease in token price, however, this inflationary cost funds the ability of the exchange to operate with zero transaction fees which in turn increases demand for the token. DGTX owners will act in their own self interest and will accept this inflationary cost because it maintains ongoing demand by supporting a busy, commission-free exchange.
DGTX is also an Ethereum-based altcoin however it is an ERC223 token. There are a few advantages to this over an ERC20 token. First of all, ERC223 tokens eliminate the risk of lost tokens that often happens when transferring ERC20 tokens to a contract.
Moreover, they allow developers to easily handle incoming transactions and reject the tokens that are not supported. This is something that is not possible with ERC20 tokens.
ERC223 tokens also require less gas to transfer since it is a one-step process to transfer them, rather than a two-step for ERC20 tokens. This also means they require less energy and place less strain on the blockchain.
The DGTX ICO
The DGTX ICO was held in January of 2018. Just like the BNB ICO, it was a huge success, although the amount raised was significantly lower at $5.4 million. However, the fact that the ICO sold out in 17 minutes and was massively over-subscribed shows the massive demand for the DGTX and its potential.
The DGTX ICO allocation was as such:
- 70% DGTX were offered to ICO investors (general public)
- 20% DGTX held back for market making and treasury
- 10% DGTX held back for the team
Unlike Binance, Digitex held back a significantly smaller amount of tokens for the team and did not allocate any tokens to angel investors. Moreover, a large percentage of total supply was designated to market making to ensure liquidity, which is vital in a futures exchange.
With the Digitex Futures Beta version launching next month, it’s not easy to make a fair comparison with the enormous success of Binance. Moreover, the Binance exchange caters to spot traders. But with almost 600,000 people on the waitlist for the Digitex launch, Digitex has every chance of becoming a very popular exchange in a short period of time.
Moreover, just as Binance recognizes the importance of decentralization for its customers, Digitex is also working on the decentralized aspect of our exchange--non-custodial account balances held on the Ethereum blockchain that are not under the direct control of Digitex. Traders will be able to trade on Digitex without having to trust the exchange with their money, and we cannot keep hold or freeze traders’ funds even if we wanted to.
DGTX vs BNB - The Takeaway
Both exchanges use a native token and are committed to being ahead of the curve, offering customers the best user experience in their respective markets. Their respective tokens have real utility in each ecosystem, and therefore efficiently capture the increasing value of the exchange through increased demand from traders.