Written by: Iris, Liu Honglin, Mankun Law Firm
Which Web3 project does not issue tokens! But how to issue? Which virtual asset exchange to issue on? This is a question that Web3 project parties need to consider very seriously. Often, Web3 project parties tend to choose to list on top crypto exchanges. The reason is:
In the eyes of users, being listed on such exchanges = the exchange affirms the project's value = the token is bound to rise = buy it!
In the eyes of project parties, being listed on top exchanges = users buy in + exchange support = wealth.
This brings us to another question: the listing fee. Considering that in recent years, even when listed on top exchanges, a project's market performance may not necessarily improve, many Web3 projects need to consider the cost-effectiveness when getting listed—Is the listing fee reasonable? Additionally, after paying high fees, besides getting listed on your platform, are there any other 'supports' that can guarantee my returns?
Well, this week has sparked a new round of 'battle' due to the listing fee. In this article, let's first have Lawyer Mankun share some insights.
Exorbitant listing fees
Although many crypto exchanges do not openly disclose listing fees, there is usually only an entry point for listing applications and contact information, but the potential cost of 'listing fees' has already circulated in the market. However, this time, the direct confrontation between Binance and Coinbase has set the topic of listing fees ablaze, and many KOLs in the crypto circle have participated in the discussion.
The matter originated on November 1, when the CEO of cryptocurrency consulting and investment company Moonrock Capital revealed on Twitter that Binance proposed a condition of '15% tokens' for listing to a leading project—equating to $50 million to $100 million based on market value. This news instantly ignited market speculation, and rumors about Binance's 'exorbitant listing fees' quickly escalated, with KOLs taking sides. Some believe this 'exorbitant listing fee' stems from the significant power of top exchanges, while others argue that the listing model of centralized exchanges is undermining the long-term interests of project parties, users, and the market, even sparking discussions on the necessity of decentralized exchanges (DEX).
Originally, the center of this debate was Binance, but a tweet from Brian Armstrong, co-founder of Coinbase, drew this top exchange into the fray. Armstrong stated that 'Coinbase's listing is free', but before he finished his sentence, Sonic Labs co-founder Andre Cronje jumped out and revealed that Binance did not charge them a listing fee; instead, Coinbase proposed a fee requirement, even reaching tens of millions. Instantly, the debate escalated from 'Do top exchanges charge exorbitant listing fees?' to 'Who is charging, and who charges more?'.
However, some have questioned whether Andre Cronje encountered fake Coinbase staff, but Andre Cronje stated that he could disclose all communication records. During this period, Binance's He Yi also tweeted that there is no listing fee, and if there are any questions, one can refer to the tokens that have already been launched; Binance has set up token distribution introductions to see if there is a 15% fee.
So far, the question of 'Is there a listing fee or not?' actually has no definitive conclusion. However, this confrontation surrounding listing fees has prompted reflection on the role of cryptocurrency exchanges in the crypto industry. What support does the listing service provided by exchanges actually include? Will these supports affect market price trends and even impact the rights of ordinary users? Lawyer Mankun believes that the hidden effects of these behind-the-scenes operations are the issues that deserve more attention.
Exchange listing application
To gain a deeper understanding of the current listing process at cryptocurrency exchanges, Lawyer Mankun attempted basic application operations on multiple well-known trading platforms such as Binance, Coinbase, and OKX.
During the initial application stage, Web3 project parties can only fill out an application form to submit basic information about the project and token for platform review. As many people online criticize, the information is completely opaque; at this stage, applicants usually find it hard to know the specifics of listing services, fees, and other details—everything is left to 'fate', waiting for the listing support team's contact. Typically, project parties may be asked to sign a non-disclosure agreement at the early stage of communication with the platform, prohibiting the disclosure of specific information and communication records related to the listing (this is also the reason why Andre Cronje stated that he could disclose information as he did not sign relevant confidentiality clauses).
Although all listing information is confidential, where in the world is there a wall that does not let the wind through? Based on communications between the Mankun Law Firm team and industry insiders, combined with various articles online, we can piece together the 'three axes' of listing fees and corresponding services at current mainstream exchanges.
Technical fees and integration support
Technical fees are basic fees charged by the platform, usually settled in stablecoins. This fee mainly covers the platform's technical team's adaptation and integration of the project token, including contract review, compatibility testing, and technical support. The technical fees vary among different exchanges, primarily depending on the complexity of integration and required security standards.
Marketing fees and promotions
How to gain traffic after listing? This is a headache for many project parties, and the marketing services of exchanges can partly address this demand. The marketing services provided by exchanges typically include media promotion, airdrops, liquidity mining, user incentive activities, etc. For this reason, exchanges often require project parties to provide a certain amount of tokens as rewards for promotion. Such airdrop activities have a good effect on increasing project exposure and attracting new users, but Web3 project parties also need to consider whether this 'airdrop' will bring excessive sell pressure.
Margin
Margin is another important fee, usually also paid in stablecoins. Exchanges often require project parties to deposit a certain amount of margin to ensure that the token price does not fluctuate significantly. This means that if the token performs poorly in the market post-listing and the price falls below a certain standard, the exchange may not refund the margin as compensation for the platform's liquidity loss. This fee can be a significant burden for project parties, but from the exchange's perspective, such a margin mechanism can protect the platform's image and filter out more stable projects.
In addition, some exchanges also provide market making services for Web3 project parties. Although market making services are usually not part of standard listing services, many project parties consider them as additional means to enhance token liquidity and market performance.
In summary, Web3 project parties may not face the 'listing fee' that most people think when getting listed on exchanges, but other aspects will still involve fees. Each of these aspects serves its purpose; at least on the surface, these listing services seem to ensure the safety, liquidity, and attraction of Web3 projects on the platform.
The potential risks of listing services
However, Lawyer Mankun believes that behind this combination of services, there may also be some significant potential risks—once exchanges and project parties reach a tacit understanding in their interests, it may turn the listing into a venue for 'joint market making'. So, how do these 'services' affect the fairness of the market? Here, Lawyer Mankun raises some of his own questions:
Promotional marketing: Will it create a false illusion of short-term traffic?
Post-listing marketing fees are often used for airdrops, liquidity mining, and other user incentive activities. Undoubtedly, these mechanisms can rapidly increase the circulation and trading volume of tokens in the short term, bringing high visibility to the project. However, we must consider one question: Is this initial traffic a long-term support or a short-term 'virtual fire'?
If high incentives are used in the early stages of listing, it may quickly push up the token price, triggering a chasing mentality among ordinary users, thereby creating a 'good' market performance in the short term. However, once the airdrop rewards for the tokens are exhausted, liquidity may significantly decline, putting pressure on market prices; under these circumstances, the investment risks for ordinary users will significantly increase.
Margin: protecting the market or a hidden 'risk zone'?
During the listing process on exchanges, margins are often seen as the 'umbrella' of the market. Project parties generally need to pay a certain amount of margin to ensure that the token price remains relatively stable in the initial phase, preventing severe drops due to insufficient liquidity or market fluctuations. On the surface, the margin provides short-term support for the token, creating a 'stable' image, undoubtedly attracting more investors, especially those retail investors who are confident in short-term stability.
However, the effectiveness of margin support is not lasting. Once project parties or exchanges stop the support operations or the margin funds are exhausted, the token price may instantly lose its support. For retail investors, this 'support' creates an illusion of price stability in the early stages, making it easy for them to enter at high prices, and once the support is withdrawn and price support disappears, the assets of retail investors may rapidly diminish, and risks may suddenly amplify. This situation poses potential risks not only to ordinary investors but may also exacerbate market volatility, leading to broader panic.
Market making: fueling liquidity or controlling prices?
Market making services ostensibly provide liquidity support for project parties, helping tokens maintain smooth trading on exchanges. However, if the worst-case scenario occurs, where exchanges and project parties team up to influence market sentiment by adjusting trading volume and controlling liquidity, market making services could become a covert means of price manipulation. Many market makers have faced scrutiny and criticism from regulators and the market due to such concerns.
For retail investors, rapid growth in trading volume often signals a bullish market, prompting them to enter at high points. However, the reality is that trading volume may not be driven by genuine demand but rather a manufactured illusion of liquidity through market making services. This manipulation could ultimately lead retail investors to be trapped at high prices, bearing greater risks while exchanges and project parties reap liquidity profits behind the scenes.
What appears to be normal trading fluctuations in the market may hide the careful arrangements of market making services, especially when retail investors lack sufficient information transparency. This 'gentle' price guidance is not only unfair to retail investors but may also cast doubt on the market's authenticity, attracting regulatory attention.
Lawyer Mankun suggests
In summary, while listing services are auxiliary tools to help projects go live smoothly, in the absence of transparency and regulation, a tacit understanding may be reached between exchanges and project parties, influencing market price trends through market making services, margin requirements, and marketing activities, even misleading retail investors. Therefore, Lawyer Mankun suggests:
For Web3 project parties, when choosing an exchange, they should maintain caution regarding the listing process, prioritizing platforms with high transparency and clear service projects. At the same time, project parties must strictly adhere to the principles of information disclosure to avoid promotional activities that may mislead investors, thereby maintaining their brand reputation.
For virtual currency exchanges, the transparency of the listing process, public disclosure of fees, and strengthening external regulation not only help enhance market fairness but can also effectively protect the rights and interests of ordinary investors. Exchanges should establish a comprehensive disclosure mechanism, clarifying the content and fee standards of each listing service to reduce negative speculation in the market. At the same time, introducing compliant external audits or regulatory agencies can ensure that trading behavior complies with market rules, enhancing the overall trust in the industry.
For individual investors, before making token investments, investors must carefully analyze the fundamentals of the project, avoiding being misled by short-term market fluctuations and high-frequency airdrop activities. For tokens with significant price volatility after being newly listed, investors are advised to remain rational and patient, avoiding blind chasing of prices to mitigate potential risks. At the same time, investors should pay attention to the relevant market activities of the project and the transparency of exchanges to make more rational investment decisions.
Through these multi-layered suggestions, Lawyer Mankun hopes to further promote transparency and compliance in the virtual asset market, maintain the long-term healthy development of the market, and provide solid support for the innovative ecosystem of Web3.
