China-based FCoin – a new crypto exchange launched in May that takes a novel revenue model – has come under the spotlight after its trading volumes appear to have almost immediately surpassed some of the largest exchanges.
While the platform's trading data is currently not visible on more notable third party sites such as CoinMarketCap, a similar service in China indicates that FCoin saw over $5.6 billion in trading volume over the last 24 hours – more than the sum of the top-10 platforms on CoinMarketCap.
Seemingly contributing to that spiking volume is the service's new business model, called "trans-fee mining," which is seen as controversial by the Chinese cryptocurrency media and has also been criticized by Binance, one of the world's largest exchanges.
Founded by Zhang Jian, the former chief technology officer of Huobi, FCoin touts a new business model that effectively turns cryptocurrency trading into mining, since it provides a means to obtain FT tokens issued by FCoin.
According to the platform's white paper, the total amount of FT is capped at 10 billion, 51 percent of which will be allocated to the public and 49 percent will be held by FCoin and its investors.
But instead of adopting an initial coin offering or an airdrop, FCoin is issuing 51 percent of tokens to the public in exchange for making transactions on the exchange. For instance, for every transaction fee a user pays to FCoin in the form of either bitcoin or ethereum, the platform will reimburse the user 100 percent of the value in FTs.
In addition, FCoin says, for all the bitcoin and ethereum it collects in transaction fees daily, it will distribute 80 percent in bitcoin to users who hold their FTs continuously throughout the day.
However, within a month of FCoin's debut, various media outlets in the Chinese crypto community had raised questions over whether traders are just using bots to send fake transactions to receive the FT coins. Zhang has denied the accusation, claiming all trading transactions are authentic.
Binance's founder and CEO Zhao Changpeng has also weighed in to criticize the platform, alleging that "trans-fee mining" is just another form of ICO.
He wrote on his Weibo account on Wednesday:
"You pay transaction fees to the platform with BTC and ETH. Then the platform pays '100%' back to you with its token. Isn't it just buying platform token with BTC and ETH? How is this different from an ICO?"
Zhao went on, accusing the firm of, in effect, making money through price manipulation:
"If an exchange doesn't get revenue from transaction fees and solely profits from the price of its token. How would it survive without manipulating the token price? Are you sure you want to play against a price manipulator? The same price manipulator who controls the trading platform?"
On another post on Thursday, Zhao further commented on FCoin's method of distributing revenue, likening it to interest in the form of bitcoin to users who hold FT tokens.
"It may appear attractive that you just hold the token and let other people who make trades on FCoin to generate dividend for you. But in the long run, who would be that stupid to keep making trades?" he said.
But, notably, OKEx, the Hong Kong-based crypto-to-crypto trading platform launched by OKCoin, announced on Wednesday that it too is launching a program that will help 100 new crypto exchanges to adopt the trans-fee mining model.
By holding 500,000 OKB, the token issued by the OKEx exchange, partners of OKEx would receive technical support from the platform in launch an exchange utilizing the new concept, the firm said.
Then, on Thursday, in a move possibly aimed to ridicule OKEx and FCoin, Binance made a seemingly sarcastic announcement that it is going to partner with 1,000 teams to open 1,000 new trading platforms adopting the same trans-fee mining model.
Commenting on the plan, He Yi, co-founder of Binance, said:
"Now that people love trans-fee reimbursement, how about giving back 200 percent? One exchange is not enough, let's do a thousand. Users have different needs, so we are now providing different choices."
As of press time, the price of FT, which can only be traded on FCoin's platform at the moment, has seen a 16 percent decline to $0.427 in the last 24 hours, reflecting a 65 percent drop since its recent high at $1.25 on June 13.
FCoin could not be reached for comment.
Tomato image via Shutterstock
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