Smart Tokens: The Tokens of the Times of Change

SYDNEY and SINGAPORE, July 21, 2020 /PRNewswire/ -- In the current scenario, where the interest in digital assets is reaching unprecedented levels, fintech companies are creating innovative solutions to allow investors and traders to leverage the awesome potential of digital assets. Bithumb Global, a Top 10 globally ranked digital assets platform, according to CoinMarketCap and CoinGecko, and one of the fastest growing exchanges since 2019, has developed "Smart Tokens," a fintech innovation that is fast becoming a go-to for many crypto enthusiasts. Smart Tokens are Bithumb Global's answer to ETF tokens and their return mechanism is similar to that of ETFs in traditional financial markets.

Bithumb Global recently launched their smart token BTCS, along with ETHS, XRPS, LTCS, BCHS, BSVS and COMPS. The yield rate of BTCS is pegged to the underlying asset BTC and others respectively, also to their core token worth.

Unlike regular tokens or coins, they are specific to Bithumb Global users. A formula is used to calculate the prices continuously, thus keeping the trading balance. Because of these characteristics of smart tokens, it is possible for anyone to buy or liquidate them with astounding ease.

Defining Features of Smart Tokens

More crypto exchange platforms are coming forward with their own smart tokens. Here are some basic characteristics of smart tokens to understand how they really work:

  • A smart token can be purchased by just about anyone. This can be done by buying it, based on its current value. Interestingly, the added benefit of a smart token over other kinds of tokens is that owners are hedging against where you foresee the price will go.

  • Smart tokens control their own prices which are tied to the actual token worth they carry.

What Do Smart Tokens Mean to these Times of Change? 

As the world is locked indoors during a pandemic which doesn't seem to have an end, the one word which defines every scenario today is uncertainty. The same is also visible in all forms of traditional markets. The chaos that the world has witnessed has driven the point home that disruptive innovation is needed to provide its security and stability. Smart tokens offer one such solution.

When even physical currencies are no longer stable, and when a steep downfall of our current systems is predicted by experts all around the world, a smart token, with its high liquidity, and equally high stability, sounds too good to be true. It is highly likely that the future would be driven by a new and revolutionary type of tokens which depend neither on a central authority nor on an exchange or other such third-party.

Smart Tokens Have an Edge Over Traditional ETFs 

Exchange traded funds (ETFs) are types of securities that store a collection of securities like stocks that often track an underlying index. They are similar to mutual funds. They can be invested in a number of industry sectors or applied various strategies according to the purpose.

Smart tokens are cheaper: Bithumb Global smart tokens are relatively inexpensive to hold. Other than the management fees, which are charged daily at 16:00 Seoul time and deducted from the Smart Token net value, there is absolutely no other cost associated with smart tokens. While traditional ETFs offer low expense ratios and lower broker commissions than buying the stocks individually, smart tokens will turn out to be more inexpensive than ETFs.

ETFs sometimes face liquidity crunch: As explained earlier, Bithumb Global smart tokens could be purchased or liquidated anytime through the platform. The process is all the easier because no third party is involved, hence the risk factor is zero. Furthermore, the transaction does not depend on the trading volumes. ETFs, on the other hand, have always been widely viewed as a more liquid alternative to mutual funds. But since they are pegged to traditional assets, the market conditions will affect them as well taking the edge off their liquidity.

Smart tokens involve minimum risks: Smart tokens have the added benefit of pre-calculated price slippage, which means that any slippage in price is very predictable before a transaction is carried out. The yield rate of the Smart Token BTCS (1x short BTC) is at the same rate but the opposite trend of that of BTC, which means when BTC goes down 5%, BTCS goes up 5%. This minimizes the risk associated with market changes which traditional tokens are highly vulnerable to.

Smart tokens are stable: The smart contract automatically maintains the exchange price between a smart token and its pegged token/coin. This implies that there is an original, real-time price associated with the sale or purchase of a smart token. This makes it much more stable, and hence also reliable. Bithumb Global smart tokens will trigger rebalancing only when the tracking difference exceeds 10%. For example, if the target of BTCS is 1x short, a rebalance will be triggered when the actual leverage is lower than 0.9x or higher than 1.1x. But the price of a traditional ETF fluctuates all day as the ETF is bought and sold.

In a nutshell, ETFs are a box full of traditional securities that can be traded on an exchange, just like a stock. Smart tokens are definitely a better and digitized version of ETFs. They are more secure, cheaper, and liquid than traditional ETFs.

Parting Words

Make sure you understand how Bithumb Global smart tokens work before investing in them. Always keep track of the net value before trading and make decisions accordingly. Despite being a nascent concept, they hold immense potential for further developments. Smart tokens will hopefully become more stable, safer, and more liquid over time. It won't be an exaggeration to call smart tokens the saviours of investors in these times of global financial adversity.


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