Why is any cryptocurrency exchange ready to work with the Bitcoin, and why new tokens have to prove their right to exist? And because there is a rather tough culling mechanism that weeds out coins that have no purpose, no security, or even an original idea. Nothing but the author's desire to create a "second bitcoin". This mechanism is called listing, and they use it in order to immediately weed out tokens for which trading platforms are not going to spend either time or resources.
What is cryptocurrency listing?
One of the most important parameters that determines the value of a cryptocurrency is public acceptance. If a lot of people believe that this or that token is of value, then it will already be possible to trade it on the corresponding sites. And markeanalogt mechanisms of supply and demand will determine the exact cost. But the procedures for launching trades are expensive. And the representatives of the exchanges simply don't want to waste their time and resources on something that does not deserve attention. Therefore, every time a new token is going to be launched on sale, it must go through a complex verification procedure, after which it will be included or not included in the list of “resources available for trading”. This procedure is called listing.
How does it work?
Usually, the token issuer initiates the procedure. To do this, he applies to a pre-selected exchange and then acts in accordance with the requirements applicable to it. Yes, each exchange has its own list of cryptocurrencies that can be traded and its requirements for them. Therefore, it is possible that at first, the coin enters circulation on a small exchange with low requirements, and then demonstrates such good turnovers that representatives of other exchanges themselves turn to its issuer with a proposal to pass the listing with them. But this does not happen as often as the creators of new coins would like.
Most often, they have to go through the standard steps of the procedure:
- Filling out the questionnaire. Here you need to indicate the basic information about the project - the date of creation, goal, link to Github, "white sheet", description of goals, objectives, development directions. Also, in some places, data on developers is required - their past merits and projects.
- The trading platform analyzes the received data and calculates the profitability of the new asset.
- A special commission from the exchange, based on the analysis, makes an opinion - whether to add a new cryptocurrency to the list or not.
- If so, the issuer and the exchange follw into an agreement.
First of all, attention is paid to the usefulness and functionality of the new coin. If it has any specific use other than “becoming the second bitcoin,” then this is a huge plus. Therefore, for example, there are more chances to be listed for internal tokens of large projects, which give the right to participate in the management of services and a number of other advantages.
The next important point is safety. Yes, blockchain technologies are pretty well protected, especially when compared to standard digital technologies, but most marketplaces have their own security standards. And if the new token does not correspond to them, then it has practically no chances to go further, because if it is hacked, then the reputation of the exchange will suffer.
There is also the so-called "pre-listing". This is when the project has already been analyzed and recognized as complying with the rules of the trading platform but has not yet been approved by the commission. At this stage, open voting can be held among the platform participants. And those projects that get the most votes will be considered first.
Everything seems to be simple, right? In fact, there are a number of extremely uncomfortable nuances.
The main thing, perhaps, is that in the overwhelming majority of cases, listing is a paid procedure. Free tokens can be added either by small exchanges or large ones within the framework of any promotion. The larger the platform, the higher the fees. We are talking about tens or even hundreds of thousands of dollars.
On average, according to the results of a journalistic investigation by Business Insider, the cost of adding a new cryptocurrency is approximately $ 50 thousand. But the amount can be more. Not to mention that this money can be issued “unofficially”. That is, in the form of a bribe. Something similar, at one time, happened on the Coinnest exchange - there the management was caught bribing $ 890 thousand for going through the listing procedure with the S-coin cryptocurrency.
Why, then, are issuers willing to pay such amounts? But because if a large and respected exchange or trading platform decides that it is worth working with this cryptocurrency, they automatically become "quality guarantors". And numerous traders and investors, who before that could not pay attention to the "young and promising" project, will immediately take it up.
Advantages and disadvantages
To be honest, the listing is the main indicator of a token's prospects and market readiness to work with it. This provides the following benefits:
- Sharp increase in investment attractiveness
- Significantly facilitating the further development of the project
- Increasing trust in both the asset and developers
- Capitalization increase
- Significant community expansion
The disadvantages include:
- The high cost of the procedure, especially in cooperation with large platforms
- The need to meet high safety requirements
- Inability to seriously change the project policy after passing the procedure
- Ability to "fly out" of the list if something goes wrong
Yes, listing is a reversible process. If for some reason the cryptocurrency ceases to comply with the platform's norms, then it may be subject to a delisting procedure. And this means the impossibility of further trade in it within the framework of this resource. Fortunately, users will be able to withdraw their assets to other platforms, but if at the time of the procedure they have open transactions, then difficulties may begin. Which - depending on the policy of the platform.
The grounds for delisting can be:
- Termination of Coin Compliance with Marketplace Rules
- Stable and long-term decline in both demand and cost
- Hacking a specific cryptocurrency
- Termination of development and further promotion of the project
- Changes in local legislation
- Numerous user complaints
As you can see, it is not enough just to go through the procedure and relax. The project should develop further, generate income, interact with the community. In a word, to bring profit not only to the issuer, but also to the trading platform.
Successful completion of the listing procedure automatically increases the "rating" of the cryptocurrency among traders and ordinary users. It gains "recognition", and with it real prospects for further development and price increases. Further, the value of the asset will be determined by the market. In any case, this is an extremely important stage in the development of any cryptocurrency project.
CryptocurrencyAuthor: EXBASE.IO | Dec 01, 2020
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