Huobi, the third-largest cryptocurrency exchange in the world, recently announced and launched a new currency. The Huobi Token (HT) rewards exchange users for their loyalty with lowered transaction fees while also carrying its own value in tradable pairs against popular currencies. The hope was to bring greater value to Huobi’s millions of users, mostly located in Asian countries.
The launch of the Huobi Token follows in the footsteps of other loyalty-building tokens that other exchanges have launched. The first and most successful of these tokens has been Binance Coin (BNB). The creation of BNB secured Binance’s place as the world’s leading exchange. It offered discounted trading fees in exchange for customer loyalty, primarily functioning as a loyalty rewards system. However, as demand for Binance Coin grew, so too did its price. Binance is still the largest exchange in the world, and the BNB token sits firmly in the top twenty cryptocurrencies.
Since Huobi is the third-largest crypto-exchange, the creators of the Huobi Token are hoping for a similar level of success. To reach that level, they’ve added extra benefits to the Huobi Token offering above and beyond the roadmap set by BNB. Additionally, they’ve structured the token distribution slightly differently. This article will explore all those benefits, details, and more to create a comprehensive guide to the Huobi Token.
Huobi Token Background
Huobi officially announced its intentions to launch a new token on January 22, 2018. Over the course of 15 days, Huobi would distribute 300 million HT (60% of the total supply) to its pro users who purchased a discounted service package. Each morning, a new batch of HT would become available on a first come, first served basis. Huobi declared this token distribution scheme, “not an ICO,” due to the nature of the offering. Users are buying a specific service package, part of which includes HT that give a discount toward trading fees.
The exchange launched the Huobi Token as part of an overall strategy to recover its user base after tightening regulations in China severely restricted cryptocurrency trading. In an interview with CoinDesk, Leon Li, Huobi’s founder, revealed that Chinese rule changes had decimated the trading volume on Huobi by 95% between September 15 and November 1, 2017. While trading gradually recovered, the leadership team saw the Huobi Token as an opportunity to boost customer engagement, especially with their premium product offerings.
The launch of Huobi Token also coincided closely with Huobi’s announcement of plans to launch an index fund for the cryptocurrency market. Taken together, these initiatives set a new direction for the exchange and demonstrated to users and spectators that Huobi was on the road toward a comeback. This was critical for Huobi’s global perception, as U.S. investors can’t legally participate in the exchange, but they are monitoring closely how the third-largest global exchange operates and its effect on the market.
Huobi Token Benefits
Huobi Token offers users several benefits. Many of these benefits are familiar from other exchange-originated tokens, like BNB. However, others are unique to HT, and are designed to drive liquidity, demand, and ultimately price.
1. Transaction Fee Discount
Users can use HT to purchase various levels of VIP status on the Huobi exchange. VIP status works on a subscription basis, with users paying monthly. The highest of these levels grants a 50% discount on transaction fees. This level of discount is similar to Binance’s discount scheme. However, unlike Binance, there’s no time limit on when VIP status expires. As long as you continue your monthly VIP subscription, you could maintain the 50% discount for many years.
The discount may be valuable to retail traders. More importantly, though, it has enormous implications for whales and high-frequency traders where a 50% reduction in transaction fees makes an enormous difference to the bottom line. Expect whales to drive demand for the Huobi Token to purchase and maintain VIP status on the exchange.
2. Liquidity Buybacks
From time to time, Huobi will use earnings from transaction fees to buy back Huobi Tokens. The goal of the seasonal buyback is two-fold. First, it encourages liquidity in the trading and price of HT and discourages hoarding of the tokens. Second, the repurchase replenishes the Huobi User Protection Fund with HT. Huobi administers the Protection Fund to guard against manipulative or fraudulent trading behavior and compensate losses in the case of an emergency.
3. Early Access & Events
Early access is a somewhat nebulous benefit, but it could prove extremely valuable. As part of the VIP subscription service, users may gain early access to assets that will trade on Huobi or special events. In some ways, the VIP-access scheme feels like a pay-to-play scenario and ethically questionable. However, it’s difficult to say precisely what benefits VIP subscribers have received to date because those events and early access are private. Whether this is sketchy or above board is still up for debate.
4. Tradeable Against Popular Currencies
Huobi supports trading pairs for Tether, Ethereum, and Bitcoin right out of the box. One of the benefits of being an exchange-created cryptocurrency is immediate listing on the exchanges. The day that Huobi Token completed its token generation event, it listed on Huobi.
You may not use Huobi or want to purchase VIP packages, but you can still buy Huobi Tokens to speculate on the future value.
5. Survey & Voting Rights
One often overlooked but a possibly significant benefit of HT ownership is voting rights on exchange decisions, including new assets to be listed on the exchange. At first, this seems like a democratic way to settle the issue of asset listing priorities. Follow the idea to its logical conclusion, however, and you realize that assets that want to be listed on Huobi will merely need to purchase a lot of HT and vote for themselves. The projects with the most money to dedicate to HT purchases will likely get listed in another potential pay-to-play scenario. For the spectating investor, though, such a situation could possibly mean high demand for the token, driving price.
Total Supply & Allocation
The HT token distribution began on January 24 and wrapped up on February 7, 2018. Each day of the distribution, millions of tokens sold out in mere minutes after going on sale. At that point, 300 million HT had been distributed to Huobi Pro members who bought packages. That’s 60% of the total supply currently in public circulation.
Another 200 million HT, 40% of the total supply, was set aside. 20% goes toward user rewards and platform operation. The other 20% is vested for four years and constitutes the team reward.
Bottom Line
The Huobi Token presents an exciting opportunity for large-scale traders like whales and high-frequency operations to lower their expenses on Huobi. Huobi itself has stated that its VIP packages intentionally target institutional investors. Additionally, the vote for new listings functionality of the coin makes a compelling case for new tokens to prioritize buying HT. So far, the token seems to have seen gradual, steady adoption. If that trend continues, expect demand for the hard-capped supply of tokens to increase and take the token price higher along with it.
