MissBlockchain.Tech founder and ICO advisor Akasha Indream walks you through the process of considering the pros and cons of where to list your tokens post-ICO.
If you are a brand new token in the blockchain ICO market, there’s likely to be members of your community already asking what exchanges you’ll be listing on even before the token smart contract is dry.
You might think that this is pre-emptive – you haven’t even finished the raise. Nonetheless, the pressure will keep building, as they try to gauge your seriousness and industry nous.
This is where you take a deep breath. Listing on just any exchange isn’t necessarily your best strategy. Do your due diligence here, too.
1. Check Reddit. Please do.
What is the general customer feedback for an exchange on Reddit? If the users find it hard to communicate with the team, once your token is listed, so will you. If a user has problems depositing or withdrawing, and they can’t get a response from an exchange, they will all be coming to your community and asking you to fix it. Which you won’t be able to, because no one at the exchange answers your messages either.
2. Consider liquidity, jurisdiction and security
Any malicious actions tarnish your reputation as a token, whether they happen directly to your platform or an exchange where your tokens are listed. This may seem unfair, but it’s the reality, because once a malicious action occurs there’s a risk of tokens getting dumped anytime and an imminent price drop as buy orders get saturated. So, do some basic online searches. Read the crypto news articles about their history, liquidity, and jurisdiction. Small exchanges may even delist you swallowing non-withdrawn user funds. If you are at all concerned about their business reputation, or impending changes in local regulation which means the tokens of your token holders may get confiscated, don’t list there. Your token holders won’t blame the exchange, or the government – they will blame you.
3. Requirements of listing
Start reaching out to exchanges and finding out about their listing processes. Some will have forms that you fill out linked to their website. Some will have an email address that you contact. Just because you fill out a form, or send an email, it doesn’t mean you will get a response or be able to list there.
This is where it can be helpful to have an exchange listing intermediary such as Listing.Fund. Getting listed on a centralized exchange has a price (expect anything between 1 and 50 BTC depending on the reputation of the exchange). There are often also requirements you may also need to meet, such as exchange orientated marketing strategies and “market making”.
Dan K from Listing.Fund describes the benefits of “market making” as:
“an essential tool to boost the confidence among traders, exchanges and investors. By creating a consistent volume, you provide an opportunity for any trader to buy and sell your token in any quantity. In addition, a solid volume is a great indication for an exchange about your company’s stability and more importantly it can be considered as a proof of a demand for your token. Nobody would have an interest to trade or list your token if its doesnt have any liquidity.”
You need to know these details, such as listing cost and market making, before you contact an exchange to make a proposal about your token, because as a serious industry player you will be expected to know and be prepared and may not get a second chance.
After months and hundreds of thousands of dollars spent fundraising and marketing, just because your token is now post-ICO and on the open market, doesn’t mean you are home free. Market making protects the brand image of a post-ICO token on a day to day basis, so that the price of the token on cointrackers like Coin Market Cap remains relatively stable with an upward trend where possible, reflecting what your community considers to be true value of the token, and not the whims and vagaries of day traders or pump and dump exploitors.
Basically, the purpose of market making in the early days is maintaining your company liquidity and community morale as a stable cryptocurrency, allowing you to focus on the work of building the platform that will give eventual utility to the coin and generate sustainable demand as an operating concern into the future.
4. Centralized or Decentralized?
There are exchanges that are free or virtually free to list on, too. These are most often decentralized exchanges like IDEX or Cobinhood. Decentralized exchanges are token exchange marketplaces that do not rely on a third party service to hold the customers’ tokens. Trades occur directly between users (peer to peer) through an automated process.
The benefit here is that this protects somewhat against some of the problems mentioned above – i.e. hacks, disappearing funds, and expensive listing costs or complex procedures. When I asked users of a decentralized exchange telegram group for Cobinhood to explain why they preferred and decentralized exchanges, members responded:
“I believe it offers the best security, because unlike centralized, decentralized exchanges don’t create a honeypot for hackers”
“If COBx packs up tomorrow, everyone loses all their money held on the exchange, a DEX takes away that risk”
“When using a decentralized exchange, your funds are in your control and under your watch rather than entrusted with a company.”
These are fairly strong preferences, based on sound reasons, straight from the mouths of diehard cryptocurrency traders, and it’s important to take their concerns into account if you want to include them in your reach.
I talked to the team behind ERCdEX.com about the contribution of decentralized exchanges in the blockchain trading ecosystem and their CEO David Aktary had this wisdom to share:
“Cryptoassets now represent billions of dollars in value, and it seems that every month new hacks and vulnerabilities are identified with centralized exchanges. This level of exchange risk is no longer acceptable. We’re bringing ERC dEX to the world so institutional investors and retail traders alike can enjoy the peace of mind in knowing that they control the security of their assets throughout the entire trade process.”
Likewise, CMO Lindsey Renken shared this sentiment:
“Traders no longer need to trust a trading platform with their assets. This means never waiting for transfers, hoping they’ll come through. Traders can feel at ease knowing their tokens are safe in their own wallet and available on-demand.”
So, the key differences to remember between decentralized and centralized platforms is that users don’t deposit their tokens in a decentralized exchange before putting them on the market, whereas on a centralized exchange they do. This difference is potentially a big relief for you, as the blockchain platform, because you won’t be being held responsible down the track by your community for actions of others outside your control (such as hackers, exchanges, and regulators).
5. Trading volume
However, there is a catch. Do the decentralized exchanges have the daily trade volume that you need to maintain a strong price? What if there is a sudden dump of tokens, because a large early investor wants a quick “out”? Their reason for dumping your token may have nothing to do with you or your platform – they just want liquidity so they can reinvest and make another buck.
Lindsey Renken, CMO of ERdEX.com, had this insight:
“In my experience, the audience of decentralized exchanges differs from that of centralized exchanges in that users are typically more eager to adopt emerging technologies and learn about new tokens. This can be hugely beneficial for companies and token issuers looking to be discovered. Typically, this audience is interested in trading tokens that are outside the top 200 by trade volume.”
So definitely think about what kind of token are you and what sort of appeal you have to the market. It pays to listen to your community. If you are a mainstream style ICO, being on a high trade volume exchange will be a convenience to your investors who are likely already using it. For a non Ethereum based token, listing on centralized exchanges may be a matter of necessity – as decentralized exchanges tend be orientated towards ERC20.
If you still have concerns about trading volume, some decentralized exchanges like ERCdex.com offer market making strategies too. You can find out how to be one of the market makers at ERCdEX.com by watching this video: https://www.youtube.com/watch?v=8p4c-URFzqs&t=2479s
However, whilst “market making is essential for kick-starting any new market, token issuers should consider the regulatory implications of making markets in their own tokens,” warns Lindsey.
Last words: Even if you arrange an exchange listing before finishing an ICO, please don’t publicise it until post-ICO, as this can be seen as promoting your token as an “investment” and contrary to regulations in some countries.
Still have questions about listing strategy? Akasha Indream is now a consultant at The Blockchain Centre.