Cryptocurrency exchanges are popping up everywhere. It is not difficult or expensive to build a crypto exchange. But to build an exchange that is secure, robust, built for thousands of users from day 1 and to work glitch free, you have to spend some moolah.
Initial Coin Offerings or ICOs are the biggest tools in Cryptocurrency space to raise money. Exchanges have raised money by ICOs, exchanging ETH, BTC or fiat for their native tokens like BNB for Binance or KCS for Kucoin.
In India, a lot of exchanges have done or are doing their own ICOs with their native tokens. BuyUcoin, Ethx.co are a couple of examples.
And then there are exchanges that giveaway their own native coins without an ICO. I am talking about WRX coins from WazirX exchange. WazirX has distributed millions of WRX coins to their users and the coin/token isn’t even on mainnet. Although the exchange has inclined towards launching it as ERC20 tokens on Ethereum blockchain, there is no further information on when it will happen.
What are WRX Coins?
Gone are the days when we received messages such as this
I just signed up on WazirX Bitcoin exchange and earned WRX coins. They’re giving away 350 WRX coins free to anyone who signs up early using this link – https://wazirx.com/#/invite/bqu3sI
WazirX set foot in the crypto exchanges market in India when it was already crowded. But there is always room for innovation. WazirX’s innovation was a promise to give few WRX coins to everyone who joined the exchange and to users that referred more users. Consider it as a free airdrop.
The idea that WazirX portrayed then was about how WRX coins in future will be used for reduced trading fees, or even as gas for their upcoming decentralised exchange. So far WazirX has announced two use cases for WRX coins, that was four weeks ago
- Reduced trading Fee
- Token Airdrops proportionate to the amount of WRX coins held by users
No sign of a decentralised exchange or any other use case yet and the WRX coins sit in the wallets of the user with no real use as of now. I am getting ahead of myself, we will talk about it in a minute.
Every WRX coin in circulation is Free
Every single one of the WRX coins people are holding is free. Sure, the distribution have been nothing short of genuine, but no one had to spend a penny to buy WRX coins. Buy is the keyword, because people do spend money on trading and receive WRX coins for free along with it. Here’s how people received WRX coins
The very first time WRX coins were distributed, it was via referrals. Users received anywhere between 100-500 WRX coins for joining WazirX and referring more users. The more you referred, the more you earned. There was a condition though, for all the WRX coins you earned, you cannot claim it directly. You will only receive them after you have completed atleast one trade.
WazirX users must be aware of the numerous trading competitions-Highest Trader Kaun, that the exchange conducted until now. The winners of the trading competitions did not just receive cryptocurrency as prize but also received WRX coins. For example, if the prize money is Rs. 2000/- worth of EOS, the winner also received 2000 WRX coins.
WazirX introduced WRX mining in June. This is not your regular PoW or PoS mining. It is a trade based mining. Basically, the more you trade, the more WRX coins you receive as reward. WRX coins could be mined everyday by users on the INR market.
So basically, no one had to spend any money to buy WRX.
What happens when you open a market to trade WRX? That is the next part. Read on.
Why is WRX not tradable yet?
Here’s a thought, when you get something for free, what is the price you put on it? WazirX has distributed 150 Million WRX coins as referral bonus out of a Billion they said they will have. On top of that, a few million WRX coins are being distributed as contest winnings and mining rewards.
But in May, WazirX did announce a milestone that needed to be crossed before they list WRX.
Milestones for listing WRX
In May, WazirX’s CEO Nischal Shetty revealed the first milestone for listing WRX coins. Nischal wrote that there are “a few milestones” to be crossed before WRX is listed. The first milestone is crossing 50 BTC trade volume on a daily basis. To put that in perspective, it means WazirX needs to have Rs. 2.3 Crore worth of trade every single day at today’s BTC price. And that is just the first milestone.
This announcement is roughly two months old. Clearly, the 50 BTC volume doesn’t seem like an easy target so we might be sitting and waiting a long time before we see WRX trading on WazirX, and that, is just the first milestone.
Forgetting the Milestones
If WazirX were to launch a WRX/INR or WRX/USDT market right now sans the milestones, there are over 200 million coins held by users ready to sell their bags and there is no incentive to buy. What happens when you have many sellers and less buyers? Price Dumps, and it dumps badly.
The two use cases announced by WazirX are not yet implemented. There is a dilemma. The first use case of 50% discount on trading fees cannot be implemented as WRX coins do not have a price. Second use case of distributing airdrops based on WRX coins held is slightly unfair as there is no way to acquire more WRX tokens.
Even if there were a WRX market, why would WazirX distribute airdrops to a few people who hold WRX coins and not do a trading competition to increase trade on their exchange? What makes more business sense?
A detailed questionnaire sent to WazirX by email from Coin Crunch has not been answered by the exchange.
A little History trip
When WazirX launched, much of the fan-fare remained around the free WRX coins. Many users joined the exchange for these free coins. Today after almost five months since WRX coins were first heard of, there is no real use for them.
WazirX’s posts were inclined towards multiple possible scenarios for WRX coins. Would like to point out some of them with a lot of maybes, future promises and guarantees
- On why WRX are free, “Instead of launching an ICO first, we intend to include our community members as the first holders of WRX” – WazirX
- Plans for a decentralised Exchange – “We intend to launch our decentralized exchange in the future when the technology for such a decentralized exchange is feasible. At that point, WRX may be used as gas within such a decentralized exchange.”
- Buyback plans – “We will buy back WRX equivalent to 10% of our quarterly profit as and when profitability is achieved. We commit to continue these buybacks for a minimum of 4 profitable quarters.”
The Devil’s dilemma here is that even if WazirX launches an ICO, it won’t receive enough money much like Ethx or BuyUcoin’s struggle, or the failed ICO of Blockonix that has to burn 97% of their tokens. There seem to be no direction for a decentralised exchange and you cannot have a buyback because WRX isn’t listed.
Incidentally, if WRX becomes an ERC20 token it cannot be used as gas on a decentralised exchange because ETH is used as gas on Ethereum Blockchain.
What happens to WRX coins now?
Nothing. But, it is still a figure to be proud of. The number of WRX coins you have are directly proportional to your efforts, whether it was referrals, trading contests, or mining, you earned them by doing a task. Will they turn into a tradable asset? That seems unlikely at the moment. As a trader I hope they come up with a solution to monetise WRX soon. As an observer I think it was a marketing technique to acquire users and it worked very well.
But, I would like to know what you think? Let us know in the comments below
Cover Image by Flickr under creative commons license