Cryptocurrency Exchanges Are Drowning in Tokens
It’s hard to put a finger on the precise point at which token overload kicked in. Token fatigue has been brewing for some time, as the spate of new coins, mostly launched by ICOs, has turned into an unstoppable torrent. Every day, cryptocurrency exchanges are barraged with listing applications by ICOs, and they do their […]
It’s hard to put a finger on the precise point at which token overload kicked in. Token fatigue has been brewing for some time, as the spate of new coins, mostly launched by ICOs, has turned into an unstoppable torrent. Every day, cryptocurrency exchanges are barraged with listing applications by ICOs, and they do their best to keep up, for the projects’ sake, and for the community’s, and because listing tokens is a lucrative business. But at its current rate, the trend is surely unsustainable.
We’ve Past the Point of Peak Token
There comes a point at which the crypto community is entitled to ponder how much is too much? How many tokens does there need to be before everyone is sated? From a technical perspective, that point might arrive when all the available three-letter token abbreviations have been used up, which will arrive around the time that the crypto space births its 17,000th altcoin. Then again, there are already multiple tokens sharing the same three-letter ticker, causing no end of confusion on sites like Coinmarketcap. There are also tokens claiming four- and five-letter abbreviations, suggesting that a shortage of desirable tickers won’t be enough to curtail the madness.
Besides, traders don’t want an end to new tokens altogether; new additions that add genuine utility and which create demand will always be welcomed. It’s the other 90% added to exchanges that leave a lot to be desired. These shitcoins, for want of a better name, have little if any real world usage, and do little more than drain liquidity from exchanges, as traders’ portfolios become increasingly stretched. Even on Binance, one of the world’s most liquid crypto exchanges, the near-daily addition of new assets is starting to take its toll. 50 coins listed on its platform currently have volume of under 100 BTC, versus 10,000 BTC or more for the likes of ETH and EOS.
Token Saturation Leads to Token Confusion
The side-effects of token overload include lower liquidity and confusion caused by tokens sharing the same or similar name. There have been a number of instances of traders buying the wrong asset, such as Matryx instead of Matrix. This week it happened again. After Binance and Kucoin announced the listing of Quarkchain, some traders went and bought Quark by mistake – an entirely unrelated asset, which experienced its very own pump and dump. Even for traders who try to stay in the loop, keeping track of all these tokens is getting impossible.
The rate of new additions to Crypto Exchange Listing, a Telegram channel that aims to predict new exchange listings before they’ve been announced, has mushroomed. Many of the account’s predictions are wrong (which is why they come with a prominent disclaimer), but the appearance of hitherto unheard of tokens in this channel illustrates the difficulty of keeping track of all these new assets and of differentiating the wheat from the chaff.
There Is No End Game, Just Endless Tokens
Not everyone is concerned by the proliferation of new tokens. “Tokenize the world!” is the oft-quoted mantra of Anthony Pompliano, and there is no shortage of crypto projects willing to heed his rallying call. Every day, an average of two ICOs completes their token sale, and that’s just the mainstream ones; the number of smaller crowdsales completing daily, whose tokens will never make it to a major exchange, runs into double figures.
There are now 1,644 tokens listed on Coinmarketcap and that is by no means all of them – the site actually takes a fairly conservative policy to adding assets, otherwise the total would be two or three times as much. Cointracking lists 5,670 cryptos, although some of these have since died.
Most tokenized projects are not scams in the Bitconnect sense. But collectively, they bear many of the hallmarks of a classic Ponzi, defined as a scheme which relies “on a constant flow of new investments to continue to provide returns to older investors. When this flow runs out, the scheme falls apart”. To support all these new tokens, cryptocurrency exchanges need to be onboarding new users at an alarming rate. The moment interest in cryptocurrency wanes most of these new tokens will be left high and dry, like ships grounded at high tide, mementos of the madness that made people believe, for a short while, that it would be a good idea to tokenize the world.
Do you think the spate of new tokens has gotten out of control? Let us know in the comments section below.
Images courtesy of Shutterstock, Coincodex, and Wikipedia.
Need to calculate your bitcoin holdings? Check our tools section.