The listing of tokens on the exchange is not a transparent process. The industry is full of all sorts of speculations and rumors, and the recent accusation of Binance in a bribe of 400 BTC for listing has become, perhaps, the apogee of this story. It is not surprising that such situations arise more and more often: the number of dubious coins and tokens is growing every day, forcing cryptoexchanges to choose those who deserve to be among the most traded assets.
Tokens as “digital dummies” on the stock exchange
One of the driving forces behind the crypto hype in 2017 was the explosive growth in the number of start-ups producing ERC20 tokens. This happened for two reasons: the convenience of creating decentralized applications in the Ethereum network together with the ability to attract investors long before the development of its own decentralized protocol, network or application. As a result, the stock market quickly found itself flooded with “freshly printed” tokens. At the same time, a problem was discovered – there is no necessary amount of liquidity in the market to ensure trading. The glut of the market with new tokens led to a natural process – the exchanges began to block off the listing of new trading pairs.
The increase in the number of tokens offered to the market occurred simultaneously with a decrease in their “quality”. The fact is that the tokens of most startups have no value: there is no working product yet, and in this situation, the token is a “digital dummy” on the stock exchange. The extremely high number of requests related to the listing of tokens, combined with the presence of huge budgets, has led to a rapid increase in listing fees. In addition, the classic black market of intermediaries and lobbyists has been formed. Making decisions on listing tokens of specific projects is often an extremely non-transparent procedure, followed by market manipulations with the price of an asset, well known as “pump and dump” schemes. To find out what the “real” criteria for listing tokens by exchanges are, experts asked for official comments from a number of exchanges and the most popular analytical service – CoinMarketCap.
So what is the listing policy?
It should be noted that not all exchanges are selective in their listing. The number of pairs traded on such sites as Yobit (3334 trading pairs according to coinhills.com) and HitBTC (620 trading pairs) is really impressive, which unfortunately cannot be said about the trading volumes. This is an indicator that the market shows no interest in most of these coins and tokens. Other sites, such as Bitstamp, Bitflyer, GDAX or Gemini, cannot afford such luxury (primarily due to legal restrictions).
Detailed official information on the topic of listing new assets is not publicly presented on any of the exchanges. Based on a series of interviews with representatives of CoinMarketCap, Cobinhood and Exmo, as well as data from Bittrex, Huobi, IDEX, OKEx and GDAX information resources, the experts identified five main criteria:
- Community and team
- Technical status
To maximize the position of those who are directly responsible for adding new tokens to the exchanges, several questions were asked:
Does it matter to you that the token is already being traded on other exchanges and the volume of its trades?
Do you work as a liquidity provider?
Are you planning to add new types of tokens, for example, ERC721 and new coins with stable value (stablecoin)?
What type of digital assets now dominates among those traded on your exchange? Utility tokens, classic cryptocurrencies or blockchain protocol tokens?
Do you have candidates for delisting? What event is the trigger for a similar procedure?
Minimum requirements for tokens
Some responses from stock exchanges turned out to be quite predictable. So, answering a question about the minimum requirements for a token, the listing manager of the Cobinhood Exchange mentioned “enough funds collected by the ICO to guarantee minimum liquidity, compliance with the SEC requirements, as well as a legal opinion that the token is not a security” . Next was mentioned the audit of whitepaper and smart contract, checking the status of social networks and the quality of work with the community.
A representative of CoinMarketCap, responsible for content and listing, also noted the absence of an active community and developed social networks, as well as the team’s dubious biography (or lack thereof) as key “red flags”. That is why CoinMarketCap practically does not add various financial pyramids disguised as master nodes and other dubious coins and tokens to its asset register.