In 2018, IDEX was undoubtedly the uncontested leader within the decentralized crypto exchange space.
The then behemoth of decentralized exchanges frequently ran 24h trading volumes of $5million USD and was responsible for the majority of transactions in the Ethereum network.
Today, calling IDEX the “behemoth of decentralized exchanges” couldn’t be any further from the truth.
Despite recent data from Coinmarketcap showing that the 24 hour trading volume from exchanges have gone to the highest its ever been, IDEX trading volumes have seemingly dropped from its 2018 all time highs.
In other words, where the aggregated trading volume for all exchanges have gone up since 2018, IDEX’s trading volume has been going down in the same period.
In fact, it’s even lost its place in the top 100 exchanges in CMC’s ranking list:
As you can see above, IDEX currently sits at #133 by crypto trading volumes.
To compare this relatively, IDEX had generally sat between #40-60 back in 2018, which isn’t too surprising considering IDEX volumes have been decreasing while total crypto trading volume have been increasing.
Well.. despite the gloom looks of things here, maybe it’s also not technically wrong to still call IDEX the behemoth of decentralized exchanges.
According to Etherscan, IDEX currently runs over 50% of all transactions from decentralized exchanges, which still makes it one of the biggest decentralized exchanges in crypto.
As you can see, although IDEX has dropped in rankings across all exchanges, it has still impressively maintained the leader in the DEX space by trading volume for pretty much all of 2018 and 2019.
As such, I thought it might be interesting to do a deep dive on its native IDEX Exchange Token and whether it is still an attractive buy in 2019.
Without further ado, let’s dive right in!
What is the IDEX Token?
The IDEX Exchange essentially has two native tokens: IDEX Token (IDEX) and IDEX Membership (IDXM).
IDEX Token (IDEX)
IDEX was formerly called Aurora Token (AURA) which later rebranded to IDEX Token.
IDEX Token is the main utility token for the exchange and is the token used for securitizing the decentralized crypto exchange.
Essentially, IDEX stakers are incentivized to provide security for the Aurora network in exchange for a portion of the exchange’s trading fees.
Staking rewards are split into three tiers of staking, with tier one staking providing the highest yield. Currently, only tier three staking (which decentralizes the Trade History) is available.
100% of the trading fees earned from the exchange are given back to IDEX stakers, and are split into the 3 tiers as followed:
- Tier one staking: Receives 42% of all trading fees on IDEX
- Tier two staking: Receives 33% of all trading fees on IDEX
- Tier three staking: Receives 25% of all trading fees on IDEX
A minimum of 10,000 IDEX Tokens are required to set up a tier three staking node to securitize the IDEX exchange.
Based on the current trading volume, the yields look quite attractive, with a 10.8% yearly staking yield based on the past month’s average trading volume of $1 million (24h volume) and a 41% average staking ratio.
Payouts are done in ETH, which drastically reduces the risk of staking compared to other staking models where generally, you receive the staking token as the reward.
In addition to staking, another key role the IDEX token plays is in incentivizing market makers to trade on the IDEX exchange.
IDEX Exchange has dedicated 20% of its total token supply in a market making incentive reserve. Any traders who have traded on IDEX within a particular month will receive IDEX tokens based on their trading volume in proportion to the total trading volume within the exchange.
For example, if you had $1,000 of trading volume in a particular month and the total trading volume on the exchange was $100,000, you would be eligible to receive IDEX tokens equal to 1% of the IDEX token pool set aside for that particular month.
And this basically helps keep IDEX liquid as there are traders who would be willing to trade on IDEX just to receive a share of the market making incentive funds.
IDEX Membership (IDXM)
Currently, the only utility for IDXM on the IDEX exchange is to provide traders with a better trading incentive on the exchange.
Essentially, as long as you hold 1 IDXM Token for more than 7 days in your trading wallet, you are eligible to either reduce your trading fees within IDEX, increase your trading rewards from the market making incentive program, OR some mixture of both.
Rather than choosing one or the other, you choose your rewards on a sliding scale.
The maximum trading discount you can get is zero trading fees, and the maximum trading rewards you can get is 2x trading rewards from the market making scheme.
The IDEX team had previously mentioned that there may be additional utilities and benefits for IDXM holders as the platform continues to grow, however, there has been no additional utility for the membership token to date.
Is the IDEX Exchange Token an Attractive Buy for 2019?
As mentioned in the beginning, IDEX has seen diminished trading volumes compared to its peak performance at 2018.
However, despite this, IDEX might still be an attractive buy for 2019. Here’s why:
More sustainable trading volumes for 2019
First of all, the crypto trading volumes for IDEX in 2018 was pretty much unsustainable.
That’s because most of the volume in 2018 was actually driven by one or two tokens at a time, as IDEX was often the go-to choice for ICOs to have their first exchange listing.
Take HOLO Token (HOT), for example, which had its first exchange listing on IDEX.
Initially, for the first two weeks of listing on IDEX, HOLO token contributed 80% of the total trading volume on IDEX, frequently running $2-4million in 24 hour trading volume.
However, once it listed on a more popular exchange, all that trading volume disappeared.
Today, HOLO Token contributes on average less than 10 ETH in 24 hour trading volume.
So why is this a good thing?
The point is, rather than seeing IDEX as an exchange that has seen a reduction in trading volume, I would see it as having inflated volume back in 2018.
In fact, it’s likely that IDEX may have seen an increase in sustainable trading volume over the past year.
Take a look at the 24 hour trading volume of the top trading pairs below, and you can see that the trading volume is much more distributed among different trading pairs.
As an IDEX investor, you would be much happier seeing that the trading volume is distributed among many trading pairs rather than having it focused on one or two trading pairs (not to mention again that those were temporary volume boosts!).
The trading volumes you see above look much more natural and organic, and seems likely to stay in the foreseeable future.
Staking helps reduce risk exposure
What IDEX holders did not have in 2018 that they now have in 2019 is the ability to stake for a hefty return on investment.
As mentioned above, the current yearly staking reward is hovering around ~10%, which is paid out in ETH (and not IDEX).
In my view, there’s two ways of perceiving staking as an investment:
- In the case of IDEX appreciating in value, your return on investment becomes twice as valuable because your investment appreciates while you’re earning dividends.
- In the case of IDEX depreciating in value, there’s a 10% cushion where as long as you fall within the 10% staking rewards range (given that staking rewards remain constant), you would still at least break-even on your initial investment. In other words, you can see staking as a form of reduced risk exposure.
Remember, the value of your token can best be gauged when it is valued on a relative level.
Consider this again: IDEX investors did not have the opportunity to stake throughout much of 2018.
Yet, both the USD and satoshi values of IDEX have fallen drastically, even more so than many other cryptocurrencies, throughout 2018 and 2019.
To put the drop into perspective, at its peak, IDEX was worth upwards of 30 cents per token.
Today, post staking, it is worth 2.3 cents per token.
Let this sink in for a minute. I’ll let you draw the conclusion to this article. 🙂
Thanks for reading!
Other articles you may be interested in:
– The Ultimate Guide to Crypto Margin Trading
– What are Initial Exchange Offerings (and Why They Are So Successful)