In a push to further decentralize cryptocurrency trading, the Erik Voorhees-led crypto exchange ShapeShift today launched its own token, FOX, which can be used for limited, commission-free crypto trading on its platform.

Starting today, the Switzerland-registered exchange plans to distribute free FOX tokens that will enable users to conduct free trades on its platform.

Specifically, each user on ShapeShift’s new platform will get 100 FOX tokens, and each token will allow them to conduct $10-worth of free trading on the platform for a 30-day period. Essentially, this amounts to $1,000 worth of free monthly trading. Trades beyond the allotted number of tokens will incur regular trading commission charges.    

Shifting away from centralized exchanges

ShapeShift is promoting its latest initiative as an attempt to increase popularity for non-custodial holdings. “The thing that we care about most is getting people off centralized exchanges, where they don’t hold their own keys, and giving them options, where they own their keys, that are enticing to use,” Jon, chief operating officer at ShapeShift, told Decrypt. (ShapeShift does not disclose the last names of its employees.)

Most prominent exchanges, such as Coinbase, have a centralized custodial model in which private keys for coins are unavailable to customers. In simple terms, this means that users do not truly own their coins. ShapeShift advertises itself as a non-custodial exchange, meaning it does not take custody of user coins.

The FOX token is similar to a loyalty reward token, and comparable in many ways to Binance’s BNB token. “The main purpose of the token is as a freely-transferable perpetual utility token that people can use,” said Jon. According to him, the token will not be traded on exchanges or be available for staking. Because it is an ERC-20 token, however, it is freely transferable, meaning it is available to others for market creation.  

ShapeShift plans to introduce further free giveaways of the FOX tokens to incentivize more trades. For example, the exchange’s FOX Back program rewards users with high trading activity with more tokens to conduct free trades.

Is ShapeShift's FOX token necessary?

In promotional materials and interviews, ShapeShift has emphasized user experience as a key reason to introduce the FOX tokens for commission-free trading. But others disagree. According to Vaibhav Kadikar, CEO and founder of CloseCross—a crypto derivatives platform, FOX tokens compromise the user experience. 

“As much as we need people to have self-sovereignty, we also need to make blockchain invisible,” he explained, alluding to the use of tokens for entry into ShapeShift’s ecosystem. “Barriers to entry [for blockchain-based services] need to be minimum.”  

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CloseCross charges a facilitation fee for derivatives trading using an array of stablecoins. This allows users to trade using their preferred stablecoins instead of being locked down to a token specific to their exchange, according to Kadikar. The addition of tokens also introduces new overhead in terms of processes. “That’s just one or two additional steps with which we are excluding 99% of the population that doesn’t understand or doesn’t even want to take the pain,” he said.

ShapeShift’s move to introduce commission-free trading comes after an industry-wide shift in mainstream trading platforms. Robinhood, the millennial trading app, ignited a fee war in mainstream trading. Will Shapeshift start a similar trend in crypto? 

“It wouldn’t surprise me if other companies tried to do the same thing, or if fees depressed throughout the whole market,” said Jon.