FCoin, a new cryptocurrency exchange that saw spiking trading volume due to its controversial revenue model, was accused of a “Ponzi”scheme and was declared “dead” by Tencent Deep Web, a famous Chinese tech-news platform.
In his report, Zhangfan described Fcoin as an exchange with a lack of fairness and that people figured out that their ‘revolutionairy’platform and business model was basically an ICO under a sugar coat.
An already-launched battle
The FCoin Exchange 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?”
Zhao also made comments on Weibo, predicting 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?”
Is FCoin building a socialist commonwealth?
Other exchanges have rewards programs, but FCoin is the only one that claims to return 80% to the users.
These are pretty big promises, and right now there are two likely scenarios:
- FCoin is attempting to become an online socialist commonwealth which shares profits, and in which the community votes on important decisions; or
- Trans-fee mining is an elaborate way of exchanging large quantities of Bitcoin and Ethereum (which cost quite a bit to make) for FCoin tokens, which cost the exchange absolutely nothing to create.
As much as we love decentralized governance and smart contract voting, cryptocurrency is not an environment in which every actor can be trusted to be pursuing the common good.