There are so many exchanges out there, but how can you know which ones are suited to the development of your coin? Bruno Macchialli, CEO of Delchain, has a few tips to share.
The crypto landscape has developed so rapidly in the last few years, that there are now multiple avenues to get your crypto project listed. In addition to traditional financial mechanisms such as equity seed rounds, series funding, etc., through the Digital Asset environment, crypto startups can find ways to fund their business with seed money funding via SAFT( Simple Agreement for Future Tokens) and public listing on crypto exchanges.
Using an exchange listing is one way to boost trade volume and liquidity by attracting the attention of exchange users and turn them into community members, establishing your presence in a particular region. Another option is a token sale through targeted private fundraising, which differs from traditional equity fundraising, where investors are being asked to back an entire business.
There are over 300 exchanges (when combining centralized and decentralized exchanges) where cryptocurrencies are currently traded, though they all offer different benefits and can therefore be ranked in various tiers. As an entrepreneur trying to get a coin listed, your aim is to climb the ladder and get your coin on an exchange that fits your needs. Let’s look at what tier-one centralized exchanges (CEX) can offer for the growth of your coin and what the alternatives are.
Proper screening and customer care
There are four considerations that anyone listing a coin needs to be aware of with regards to the type of exchange:
- Company structure: incorporation, regulation and license
- Strong financials
- An exchange that is incorporated in a way that fits your business model. For example, there may be legal ramifications for exchanges based in certain countries.
- The Tokenomics: What is the coin’s value proposition, utility, model, market capitalization, for selling the token to investors?
- Good social media and presence within the community.
Once you have considered these key factors, you can decide what road to go down. Tier one exchanges have much more sophisticated checks for information on a project. They demand more in terms of knowing your client (KYC) and business (KYB) checks so that you can feel confident about their legitimacy.
On the other exchange side, there are decentralized exchange (DEX) that are not regulated and has no central authority. Therefore, they don’t ask for any information. The absence of checks and due diligence when listing a project can bring some concerns.
However, at the same time, Decentralized exchanges can provide your coin with quick access to the market as there are far fewer admin procedures to get your coin listed. Decentralized finance applications give you the option of controlling your crypto assets fully. You are allowed the freedom to interact with the financial system on a peer-to-peer basis. This can potentially give you liquidity pools and staking options not available on centralized exchanges.
There is no doubt that tier one centralized exchanges have a better level of customer care because they are not solely interested in making money from the listing and trading fees, but also will help you to formulate a plan to help the projects with the trading contest and marketing to increase visibility.
Volume, network, and traffic
Although it can be misleading, trading volume in combination with unique visitors to the exchange website and the number of traded coins is a great way to signify the quality of exchange. De-centralized exchanges (DEX) are currently seeing very large ETH traffic volume since Uniswap (biggest DEX) only allow ETH blockchain. If these numbers are in your favor, then you can be sure plenty of people will see your coin. It should be noted that fake volume can occur on both central (CEX) and DEX.
Top-tier exchanges often have better-developed official chat rooms and social networks, which provide great coverage for your project. Taking a look at these channels shows you how active their community is, and how the exchange managers interact with their clients.
It is also worth considering where an exchange is located geographically. Top-tier exchanges can provide better localized regional outreach for your project. However, some DeFi options can also attract much better attention since they are not attached to a specific region, so it all depends on what your priorities are in terms of visibility. The ease of opening an account can potentially enable you to also access a larger volume with Defi—Tier one CEX are restricted to accounts open on the exchange.
The importance of security
In general, bigger exchanges are more likely to need a security team and properly fund one. But unfortunately, hacks can happen in the cryptocurrency industry. On December 6, BitMart announced that they had lost around $150m (£113m) worth of tokens from their “hot wallets” (digital wallets) due to hacking. Although user-level protection such as two-factor authentication is standard for most exchanges, not all exchanges go above and beyond to keep your investment safe.
A couple of security options to be mindful of when choosing a centralized exchange for your coin are:
1. Asset protection: If exchanges are serious about security, they will provide additional protection for your cryptocurrency so that you are compensated for any hacks.
2. Cold storage: Exchanges should keep the majority of their assets in cold storage, meaning that it is offline and impervious to hacking attempts
It is important to note that when it comes to DeFi, loss is loss and there is often no monetary support for hacks. In 2021, the vast majority of DeFi platforms were unaudited. For example, Alchemix and Compound, two well-known DeFi systems, lost millions of dollars due to vulnerabilities in their programming that went undetected—a minor blunder might result in tremendous losses.
It can be overwhelming picking an exchange that is right for your project, but as long as you take the time to consider the circumstances of your project, you will find a suitable exchange. It’s not about pinning yourself to either a top tier exchange or going down the route of DeFi—but rather—seeking opportunities from both possibilities.
Your aim should be to capture the most attention possible from your targeted community for your token so that in the future you can maximize the list of exchanges it’s featured on.
Both CEX and DEX offer a project their own advantages. Potential token buyers can see that the token goes through the rigorous screening process of a CEX and get the credibility it deserves. Whereas a DEX listing can bring a number of token buyers that are not registered on the CEX and that are interested in buying the token. Either way, it’s worth using a resource such as Coinmarketcap to assess the trading volume and website traffic for an exchange. Finally, ensure that the exchange has a diligent screening process and has considered its security before trying to get your coin listed there.