LEO is an exchange token introduced by iFinex, the parent company of cryptocurrency exchange Bitfinex. The token has similar features and advantages as BNB, one of the first companies to use the encrypted exchange platform token.
Encrypted traders have been frantically selling an exchange token called "UNUS SED LEO (LEO)". LEO is a token introduced by iFinex, the parent company of Bitfinex, the controversial cryptocurrency exchange. The token was issued through a $1 billion private token transaction completed in May this year. See "Bitfinex Completes $1 Billion Financing in 10 Days".
Through this section of the block rhythm BlockBeats to lead readers to look at Leo's value proposition, its burning mechanism and how it compares with the currency platform (BNB)?
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Exchange tokens typically derive value by providing the following benefits to holders and users:
1. Exchange fee discount
2. Get products and services
3. Quasi-ownership of the issuer’s cash flow through the combustion mechanism On the surface, it is clear that LEO got some inspiration from BNB. In the figure below we compare BNB and LEO.
The discount on the use of BNB payment fees on the currency is adjusted every year. The plan is to cancel all the BNB discounts until the 5th year discount. Current currency users can enjoy a 25% discount. If the currency is executed as planned, BNB's next discount reduction will be around July 20. In contrast, LEO offers a permanent discount to its users until LEO users can always enjoy discounts on iFinex products until the last LEO is completed.
Get products and services
BNB users can access the recently launched Binance DEX, which is the sole base currency for the DEX. In addition, after the restructuring of the coin-based Launchpad, the BNB holders can also participate in the lucky draw to obtain the share of IEOs launched on the Dollar Launchpad. In contrast, LEO holders currently have no additional opportunities to acquire LEO's proprietary products and services due to the short lead time of LEO. But according to Bitfinex's white paper, LEO holders "are expected to benefit from future projects, products and services."
As part of the token sales, the company said it intends to burn some of the BNB's supply, while the burning BNB is equivalent to 20% of its quarterly profit, and the combustion mechanism will last for 100 million BNBs (total supply) Half) is completely burned.
On the other hand, iFinex said it plans to buy back LEO directly from the market. The company will use the 27% of the combined revenue of the previous month to purchase LEO tokens at market value until all LEO tokens are no longer in circulation. Interestingly, similar to the Burning BNB, iFinex's white paper also states that “LEO tokens used to pay fees can also be used to meet repurchase commitments.” Therefore, iFinex may not have to be charged according to LEO’s fees for products and services. Buy LEO directly from the market.
In addition to using monthly income to burn tokens, iFinex also said it intends to use Crypto Capital (a cooperative payment processing company of Bitfinex) and funds that may be recovered after Bitfinex was hacked in 2016 to destroy tokens. iFinex will use LEO tokens that repurchase at least 95% of Crypto Capital's net assets and LEO tokens that recover at least 80% of the 2016 Bitfinex attack on net assets.
Quantity and value capture
Since the launch of the currency, the market share of Bitfinex and many other leading cryptocurrency exchanges (measured by trading volume) has been snatched away by this new cryptocurrency exchange.
Bitfinex's trading volume peaked in October 2017, accounting for 25% of the total exchange's cryptocurrency. However, as of May 2019, this figure has fallen to 10%. At the same time, the market share of the currency has increased from 5% in August 2017 to 60% in May 2019.
In terms of the amount of token transactions, since LEO started trading on May 20th, the data currently available is limited. However, according to the data collected, one thing is worth noting. Although the theoretical value of LEO should reach $1 billion, the initial trading volume of LEO has been in a downturn. So on average, LEO's daily trading volume is about $5 million.
For this data result, it is analyzed that there are several reasons:
The LEO trading market is still in its infancy and is currently not well developed;
LEO's transactions on Bitfinex account for the majority of LEO trading volume and are only open to KYC traders, which leads to limited trading channels;
Large LEO shareholders are interested in creating a liquidity market for LEO, forcing Bitfinex to acquire LEO at a higher price.
The game theory behind the third reason is:
1. LEO holders know that Bitfinex will buy LEO shares in the market every month;
2. LEO holders collude to keep tradable LEO supply at a low level;
3. When Bitfinex acquired LEO in the market this month, the lack of inventory and LEO inventory available for purchase will push up the price of LEO and ultimately benefit the major shareholders of LEO;
At present, this year is still the year of IEO, which was led by the currency security. Since its inception, BNB has created tremendous value for investors. With the launch of LEO, Bitfinex hopes to compensate for the losses caused by its crypto capital position and maintain its vacillating position as a customer-centric cryptocurrency exchange.
Original author: The Block