What is FTX?

What is FTX?

FTX is a cryptocurrency exchange that primarily focuses on derivatives and leveraged products. Derivatives are those assets that derive their value from certain products, which in this case are cryptocurrencies. In addition to derivatives trading, FTX also offers numerous features such as Spot Trading, Futures Trading, Leveraged tokens, and many more. From its founding in 2018, till now, FTX has enjoyed immense popularity and has become one of the leading cryptocurrency exchanges in the world. Its popularity can be exemplified by the fact that celebrities and superstars alike are jumping onto the bandwagon. Sports superstars like Tom Brady and Steph Curry have already endorsed FTX, while Shark Tank’s Kevin O’Leary has agreed to become a spokesperson for the exchange. It seems that the sky is the limit for FTX.

Who Created FTX?

FTX was founded by Sam Bankman-Fried, who is an MIT graduate. Before founding FTX, Bankman-Fried used to work at Jane Street Capital. He was also the co-founder of Alameda Research, along with Gary Wong. Gary Wong is currently the Chief Technical Officer (CTO) at FTX and used to work at Google as a software engineer. Bankman-Fried and Gary Wong along with Nishad Singh (Head of Engineering) founded FTX in 2018. Bankman-Fried is a staunch believer in effective altruism that is a utilitarian movement that advocates doing as much good as possible in one’s life. As such, he has earmarked billions of dollars for charity. In addition to this, 1% of FTX’s net trading fees also go to charity.

FTX has its headquarters in The Bahamas, and it is incorporated in Antigua and Barbuda. It remains unregulated in the US. However, all is not lost for US-based crypto traders, as they can access its partner entity known as FTX.US, which is registered with FinCEN. There is a significant lack of trading options in FTX.US, and the account creation process is also significantly stricter.

How it Works?

As mentioned earlier, FTX specializes in derivatives trading, and this involves futures trading among other forms of trading. Futures trading involves trading that is done with leverage. This means that whenever you buy into a position you are potentially taking a loan or borrowing capital. This increases the quantity of your overall position, and can potentially result in massive profits, but it can also lead to devastating losses. FTX offers up to 101x leverage on most of its futures contracts. If we compare this with the rest of the industry, then Binance is the clear leader here by providing up to 125x, while Bitmex offers 100x.

Additionally, FTX offers its users the ability to speculate on the future price of their positions, by providing a range of call and put options. These options give the user the right but not the obligation to buy at a future strike price. Similarly, there is also the option of MOVE contracts. These contracts allow the user to bet on how far the price of a token will change over a fixed period of time. Essentially what this means is that depending on the details of the contract, the increase or decrease in the price of the token, will result in either a profit or loss, depending on what the user has bet on.

In addition to its derivative trading options, FTX also has spot trading markets. Here users can buy and sell cryptocurrencies instantly, or put in a market order for the price for which they would like to buy or sell. Currently, the exchange offers more than 100 different trading pairs. It offers trading for all the big boys of crypto like Bitcoin, Ethereum, BNB, and Ripple. Another interesting feature of FTX is that it allows the trading of leveraged tokens. It primarily offers the trading of ERC-20 based tokens which give up to 3x leverage to the traders. What this means is that if a user opens a position of ETH/USD 3x Long ETH, and Ethereum goes up by 5% then the leveraged token would go up 15%, and vice versa if it goes down.

FTX also has an insurance fund. The traders who use 50x-100x leverage in their trades pay much higher fees. These fees are then submitted to this insurance fund. The insurance fund is used to help prevent the losses of the traders in the event that there is sudden volatility in the market. For example, if the FTX liquidation engine fails due to a massive decrease in the price of Bitcoin or a similar catastrophic event happens, then the traders are compensated for their unfairly closed positions through the insurance fund.

What is FTT Coin?

FTT is the native token of the FTX exchange. In terms of function, it can be compared to how BNB works within the Binance exchange. Holders of FTT are entitled to lower trading fees and collateral for futures trading. They are also entitled to any gains that come through the FTX insurance fund. This feature is known as socialized gains. Another similarity with BNB is that FTX plans to burn at least half of the total supply of FTT, thus creating scarcity, and increasing the overall value of the token. FTT ranks among the top 30 most valuable cryptocurrencies in the world, with a market cap of over $8 billion at the time of writing.

Concerns

FTX’s most pressing concern is the level of competition it has to face from the already established and successful crypto exchanges. These exchanges include heavyweights like Binance and Coinbase, while also including other popular exchanges like Kraken and Gemini. Another concern regarding FTX is that its overall functionality and interface are much more suited to experienced crypto traders. Newbies and people who are curious about crypto may find other exchanges like Binance to be a bit more user-friendly. Although FTX is a relative newcomer to this industry, its surge in popularity, along with its numerous celebrity endorsements have shown that it is a solid competitor.

Where to buy FTT?

FTT can be purchased on major crypto exchanges like FTX, Binance, or Gate.io — similar to how one would buy any other cryptocurrency. You can either place a market buy or a limit buy. With a limit buy, you determine the price you’re willing to pay, and your order gets filled once the token price reaches your set limit price. If you want to get your hands on the token quickly, you can place a market order, where you agree to pay the current market price and have your order filled almost instantly. If you are interested in trading FTM, you can do so by visiting Binance.

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Text source: CryptosRus

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