Over the past weeks, FCoin has moved from an unknown back corner to the most (in)famous exchange in the market, with a volume that—supposedly— exceeds top coin marts like OkEx and Binance.
Here’s a quick reprise: the FCoin Exchange, which launched a bit over a month ago, runs on a unique business proposition: all transaction fees are reimbursed to the users, in the form of the exchange’s native Token. 51% of the FCoin Token supply is locked up and can only be extracted through trading, in a system the white paper calls “Transaction-fee mining” or “Trans-mining.”
The system raised plenty of eyebrows as a slightly roundabout way of getting users funds. “You pay transaction fees to the platform with BTC and ETH,” said Binance’s Changpeng Zhao. “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?”
On Weibo, Zhao (who, unlike FCoin, does not pretend to give away crypto) predicted that the system would invite even more sleight-of-price than usual, “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?“
This system is not inherent to Trans-fee Mining, and FCoin could have easily listed coins in a way that doesn’t upset the network. But the listing system does reflect the the exchanges’ priorities: it’s no surprise that a business that apparently welcomes wash trading would also bring its fake-looking volume onto the blockchain.