On February 10, 2020, the price of OKB, the native token of the OKEx exchange, surged by more than 27% within a single hour. This sharp increase followed an official announcement from OKEx stating that it would permanently destroy 700 million OKB—representing 70% of the token’s initially planned total supply.
Following the news, OKB broke past the $4 price level and continued to reach new all-time highs, eventually touching $5.9 before stabilizing near $5.30.
The token burn attracted significant attention across the cryptocurrency sector, especially as Bitcoin itself had recently broken back above the $10,000 mark. The dramatic reduction in supply shifted market focus toward exchange-based tokens and their economic models.
Why Did OKEx Destroy Its Tokens?
The timing and method of the token burn are particularly noteworthy. The announcement was made alongside the launch of OKEx’s public blockchain testnet, OKChain. More importantly, the exchange revealed that OKB holders would receive a new token, OKT—the native asset of OKChain—proportionate to their OKB holdings.
This airdrop-like distribution meant that OKB holders would receive the new blockchain’s tokens at no extra cost, which many analysts cited as a key driver behind the buying pressure and price appreciation.
Market observers pointed out that leaving a large portion of the token supply unreleased could have created persistent sell pressure and uncertainty. By destroying these tokens, OKEx effectively removed a major overhang from the market, boosting investor confidence.
Some industry experts also suggest that the move may be part of a broader strategy to gradually transition value from OKB to OKT, effectively using the existing token holder base to bootstrap adoption of the new blockchain.
Background and Tokenomics of OKB
OKB was initially launched in March 2018 with a total planned supply of 1 billion tokens. These tokens were allocated across several categories, including user rewards, team incentives, foundation operations, and early investor allocations. Only 300 million OKB were ever released into circulation—all through user-focused campaigns and reward programs.
With this latest burn, all tokens earmarked for the team and early shareholders were permanently removed from the supply plan.
Public blockchains like OKChain often employ inflationary token models to encourage network participation and usage. Directly integrating OKB into this new economic structure posed challenges, which led to the creation of a separate native asset—OKT.
The Broader Context of Exchange Tokens
Utility tokens issued by crypto exchanges have often faced criticism over their limited use cases and value accrual mechanisms. Common benefits include discounted trading fees and exclusive access to token sales.
After initial coin offerings (ICOs) declined in popularity, exchange-led fundraising methods like Initial Exchange Offerings (IEOs) emerged. These sales typically require participants to use the exchange’s native token, creating additional demand.
In contrast, OKT is designed to function as the base currency for the OKChain ecosystem—powering transactions, smart contracts, and decentralized applications. This could give it utility far beyond the OKEx exchange environment, though success is not guaranteed. Beyond Ethereum and a handful of others, very few public blockchains have achieved widespread adoption.
Some commentators have warned that once the snapshot for OKT distribution is completed, OKB could face selling pressure, as some users may no longer have an incentive to hold it.
Legal Challenges and Market Uncertainties
OKEx and OKB have also been subject of legal controversy. In 2019, a well-known investor, Yang Yongxing, publicly accused the exchange of freezing and later closing his account, which he claimed held significant amounts of OKB and USDT. OKEx founder Star Xu denied the allegations, and the matter entered legal proceedings.
If the claims are validated in court and the frozen assets are released, the market could see substantial sell pressure due to the volume of tokens involved. This legal uncertainty remains a lingering risk for OKB holders.
Comparison with Other Exchange Tokens
Before the surge, OKB had been trading in a relatively narrow range between $1 and $3, lagging behind the native tokens of competing exchanges like Huobi’s HT and Binance’s BNB.
The OKEx announcement specifically highlighted that all future OKB buy-backs and burns would be conducted exclusively on the secondary market. This appears to be a subtle reference to past controversies surrounding rivals’ token burn methods.
Both Huobi and Binance have used portions of their profits to buy back and burn tokens, reducing circulating supply and supporting prices. However, in mid-2019, Binance faced criticism when it changed its burn mechanism, leading to accusations of favoring insider selling. Huobi later encountered similar scrutiny when it adjusted its HT token economics.
👉 Explore more strategies on token economic models
Frequently Asked Questions
What does burning tokens mean?
Token burning is the process of permanently removing tokens from circulation. This is usually done by sending them to a verifiable public address that no one can access. Reducing the supply can increase scarcity and, if demand remains constant, lead to price appreciation.
Why did OKB price increase after the burn?
The price rose due to a combination of reduced future selling pressure and the announcement that OKB holders would receive the new OKChain token (OKT) for free based on their holdings.
What is OKT?
OKT is the native cryptocurrency of OKChain, OKEx’s newly launched public blockchain. It will be used for paying transaction fees, staking, and governing the network.
How does OKB differ from other exchange tokens?
Like HT and BNB, OKB offers benefits such as trading fee discounts and participation in token sales. However, its recent token burn and tie-in with OKChain aim to expand its utility beyond the exchange environment.
What are the risks associated with holding OKB?
Market volatility, regulatory changes, competition from other exchanges, and unresolved legal issues could all impact OKB’s price and utility.
Will OKB be used on OKChain?
While OKB and OKChain are linked through the initial airdrop, they serve different purposes. OKT will act as the primary gas and governance token on OKChain, while OKB remains the utility token for the OKEx exchange ecosystem.