What is KuCoin Token (KCS): an overview of the exchange token

Cryptocurrency exchanges often issue their tokens to attract more users: with their help, the companies provide various privileges and bonuses to their clients, and some products are not available for those who do not own native tokens of the exchange.

What is KuCoin Token?

KuCoin Token, or KSC, is a native ERC-20 token of the famous KuCoin crypto exchange launched in 2017 on the Ethereum blockchain. The exchange provides KCS token holders access to financial products such as Earn, launchpads, and the ability to generate revenue from trading activity and commission discounts. In addition, the KCS token is used to pay for gas on the KuCoin Community Chain (KuChain) and manage the blockchain via DAO.

In 2021, the KuCoin Community launched the KuChain network based on Ethereum. The KuChain blockchain is used for decentralized trading applications (DEXes) and lending protocols that allow obtaining and issuing cryptocurrency-secure loans. The KuCoin team has also launched its own KuChain Bridge, allowing token transfers between the Ethereum and KuChain networks.

The KuChain network was developed using Cosmos SDK, like the blockchain of another well-known exchange, OKExChain. KuChain is powered by Proof-of-Staked Authority (PoSA), an advanced Proof-of-Authority (PoA) consensus algorithm based on the reputation of nodes (validators) and, at the same time, a staking mechanism. Unlike Proof-of-Stake, the role of the validator in PoSA networks is performed by the user himself. In the KuChain ecosystem, KuCoin Token plays the role of one of the critical assets, as well as a management token that allows its owners to vote on the blockchain's development.

The purpose of creating the KuCoin Community Chain blockchain is not original: the developers of this network sought to solve the traditional problem of scalability and slow and expensive transactions in Ethereum.

The KuCoin team copied the Binance tokenomics model: 200 million KCS tokens have been issued, and the company will regularly repurchase and burn until their number reaches 100 million. According to CoinMarketCap, the maximum issue (number) of tokens is 170.1 million KCS, of which 144.1 million (56.8%) are circulating on the market.

KCS token ranks 66th among all cryptocurrencies in capitalization, which is $953.4 million. However, in terms of daily trading volumes, which reached only $1.3 million, the KCS token is only in 794th place — this indicates that KuCoin Token has more holders than traders. According to the same CoinMarketCap data, the number of KuCoin Token holders exceeds the number of traders by 8.6 times — 5,300 vs. 614. Over the year, the number of KCS holders increased by almost 30%, while the number of traders increased more than 4 times.

When writing, the KCS token was trading at $9.89, 65% below its all-time high (ATH) of $28.8, reached in December 2021. Over the past year, the KCS exchange rate has risen nearly 24% and has more than doubled from its local low of $3.84 in September 2023.

KuCoin Token problems

Like most exchange-traded tokens, KCS doesn't carry any particular value or solve real problems. KCS tokens are only of value to KuCoin users, which means they are highly dependent on the "health" of the exchange.

For example, if Binance, Coinbase, or any other major crypto exchange leaves the market, it will have an insignificant impact on Bitcoin, Ethereum, and the crypto market as a whole. Of course, there will be a "drawdown," but not critical. But if something happens to the KuCoin exchange, the KCS rate will likely collapse. Remember what happened to the native token FTT when the FTX exchange declared bankruptcy: its price collapsed more than 17 times from $25.47 to $1.45 in less than two weeks.

Such a thing can happen not only due to the company's fault but also for other reasons, for example, due to the hacking of the exchange or problems with regulators, whose pressure is regularly subjected to companies providing cryptocurrency trading services.

In addition, among the known crypto exchanges, KCS supports only KuCoin and ByBit, and the only blockchain network, not counting KuChain, in which the token is available, is Ethereum. Outside the issuer's ecosystem, the KCS token has virtually no use, but this has not prevented KuCoin Token from entering the top 70 cryptocurrencies by capitalization.

Does KuCoin Token have prospects?

The prospects of the KCS token mainly depend on the performance of the KuCoin exchange: if the financial indicators improve and the number of users grows, the cryptocurrency's rate may show positive dynamics. KuCoin is in fourth place among crypto exchanges in the CoinMarketCap ranking but is significantly behind Binance, Coinbase, ByBit, and OKX in terms of trading volumes.

In the future, the exchange team plans to develop its decentralized solutions, such as DEX exchange and its own KuCoin Community Chain, which will expand the applicability of the KuCoin token, as well as a decentralized autonomous organization (DAO), which will allow KCS owners to participate in the management of the Web3 ecosystem.

The company has already announced that it will make expanding the applicability of the KCS token its top priority to provide its holders with even more benefits, including in the long term. If all this helps attract new users to the ecosystem and the number of KuCoin Token holders and traders grow, it could positively impact the token's price.