What Is FTX Token (FTT)?

FTX is a crypto derivatives exchange built to offer futures, leveraged tokens, and OTC trading. Derivatives are a financial contract between two or more parties that can trade on an exchange. Futures are the derivatives that make the parties obligated to transact an asset at the future date and price. Over-the-counter (OTC) is the process of how securities are traded through a broker-dealer network. These securities are traded directly without being listed on the exchange.

The mission of FTX is to solve the futures exchanges’ crippling flaws that are holding the space back and move the derivatives space towards becoming institutional-grade. According to the whitepaper summary, FTX wants to be one of the best crypto derivatives exchanges.

Furthermore, FTX is backed by Alameda Research, a ~$100 million AUM (assets under management) quantitative cryptocurrency trading firm. Assets under management sum up the market value of investments that an entity or person manages on behalf of clients.

FTX launched its own automated OTC RFQ system that scaled its volume to $30 million per day without much marketing. RFQ is a “request for quote” that offers institutional-sized access to trading groups, OTC desks, agency brokers, and other participants to make and source off-screen block liquidity in futures, crypto options, etc.

FTX features:

Preventing Clawbacks

Due to poorly designed management systems currently, frequent clawbacks happen that lead to losses of millions of dollars. Clawbacks often come with a penalty, like in case a clawback is put into effect, an employee needs to pay additional funds to the employer. FTX reduces these frequent clawbacks using a three-tiered liquidation model, which is as follows:

• Positions are closed down firstly with rate-limited liquidation orders.

• In danger of bankruptcy, a backstop liquidity program is provided by FTX.

• An insurance fund is leveraged to the customers to prevent losses.

Centralized Collateral Pool + Universal Stablecoin Settlement 

Collateral is split among many margin wallets and separate tokens, making it difficult for traders to rebalance and prevent positions from getting liquidated. As a solution to this, FTX derivatives are stablecoin-settled and require only one universal margin wallet.

Leveraged Tokens

Based on ERC-20 standards, leveraged tokens offer token holders an "uplifted" or "leveraged" position in the cryptocurrency market. Thus, leveraged tokens can provide many benefits when the original token underlying the leveraged token performs at its peak in the cryptocurrency space. BTC, ETH, EOS, USDT, XRP, BNB, TRX, and LEO leveraged tokens are offered by FTX currently.

FTT is the native token that is the backbone of the FTX ecosystem. Many incentive schemes are held to increase the demands of FTT:

1. Token Burn: One-third of all fees generated on FTX are used for FTT purchase until half of all FTT is burned. Cryptocurrency burning is when a fraction of tokens are sent to a wallet with no private key. This means the tokens are lost forever. Tokens are usually burned to reduce availability and increase market value.

2. Collateral: Being used as collateral for futures positions increases the demand and utility of FTT.

3. Discounting on Trading Fees: Users who hold the FTT for a period of time receive lower FTX futures fees.

4. OTC Burn: Based on OTC volumes and revenues from the FTX OTC portal, burning and repurchase of FTT happen.

5. Socialized Gains: Other futures exchanges suffered clawbacks during large market movements, while FTX demo simulation, which mirrored positions of different futures, demonstrated no clawbacks. FTX gained a million to the insurance fund.

6. Future Expansion: FTT is to be used as a spot exchange in the future for initial exchange offerings.

History of FTX (FTT)

FTX was launched in 2019. The whitepaper of FTX was last updated on June 25, 2019. The team of FTX comes from leading Wall Street quant firms and tech companies—Jane Street, Optiver, Susquehanna, Facebook, and Google.

Sam Bankman-Fried is the CEO of FTX and was a trader on Jane Street Capital’s international ETF desk. Gary Wang is the CTO and founder and was a software engineer at Google before FTX.

FTX Trading Ltd was formed in Antigua and Barbuda and is headquartered in the Bahamas.

How Are New FTT Tokens Created?

FTX supports the staking of FTT. All users must pass at least KYC 1 to own and stake FTT.

Staking provides the following benefits:

1. Promote referral rebate rates: Referrers who stake FTT are paid a higher fraction of their referees’ fees.

2. Maker fee: In addition to the FTT fee discounts, stakers have a new make fee that overrides the regular fee schedule.

3. Bonus votes: Based on FTT held and volume, the stakers get bonus votes.

4. Increased airdrop rewards: Increased SRM airdrops are provided to stakers. Users who pass KYC 2 are supplied with SRM rewards. To qualify for SRM airdrops, users need to hold a minimum of 500 FTT on their FTX account.

5. Blockchain fees are waived: Stakers get many free ETH and ERC20 withdrawals per day.

6. IEO tickets: Stakers get tickets for IEO hosting in FTX.