By guest contributor Alex Wong, analyst, Atchison Consultants
Investors in Australian shares will reap a total of $37 billion in dividends during the February reporting season, after many Australian companies boosted their payouts. This is a stark contrast with the cryptosphere, where only a handful of cryptocurrencies distribute dividends to holders.
Whilst there are various methods through which cryptocurrencies generate income, a primary source is though tokens which are required to power blockchain and cryptocurrency exchange platforms.
Cryptocurrencies such as NEO distribute dividends in the form of GAS tokens to holders. Holders of NEO are only eligible to receive a distribution if NEO coins are held within a private wallet and not on an exchange. A GAS token is an operational token which is required to fuel smart contracts and tokens built on NEO blockchain. Users of smart contracts pay in GAS tokens to deploy and run smart contracts. Fees paid are proportional to the computing power consumed by the contract. Holders of GAS tokens are able to exchange them for one of the main cryptocurrencies, which can ultimately be converted to a currency, such as U.S. dollars.
Some cryptocurrencies created by exchange platforms pay dividends to their holders. For example, KuCoin exchange has its own currency, known as KuCoin Shares, which pay dividends. Dividends are financed out of revenues from website advertisements, interest generated through cash holdings and trading fees. A cryptocurrency exchange may distribute a proportion of trading fees collected from traders to holders of a platform’s native coin. In the example of the KuCoin exchange, holders of KuCoin Shares receive 50% of trading fees collected by the exchange, with daily distributions. The amount of distribution paid will be dependent on the trading volume of that particular day and, as such, distributions will also vary from day to day.