Fcoin is a crypto exchange based in China and it officially launched sometimes last month. The crypto exchange was founded by Zhang Jian, a crypto guru who has been an active part of cryptocurrency and blockchain right from the early days of bitcoin.

Fcoin has been described as the largest crypto exchange at the moment, with a trading volume larger than that of the hitherto “largest” exchanges. Its trading volume was about $6 billion (only USDT/BTC) as at the 13th of this month and that brought it in the public eye and under public scrutiny. As a matter of fact, Fcoin has been described by some media outlets as an exchange capable of effortlessly handling the market’s entire volume.

Fcoin flatpaper

The platform’s whitepaper shows that the sum of all FT (Fcoin Token) to be mined has a 10 billion limit. Media outlets have reported that the exchange’s organization model is community-like and highly autonomous model, as its organizational structure doesn’t revolve around any Chief executive officer or Board of Directors.

The most distinct feature of Fcoin is its revenue model which has been described as totally new and different from the norm. This model has, however, been on the receiving end of the numerous controversies surrounding the utility of the crypto exchange. It is important to state that the success which the exchange has enjoyed up to this time is attributed to this revenue model called “trans-fee mining”.

51 percent of token – for public allocation

This revenue model simply operates by converting cryptocurrency trading to FT mining. The whitepaper indicates that 51% of its token will be publicly allocated while the remaining percentage will be held by FCoin and its investors. Normally, the 51% ought to be made available to the public either by an airdrop or an initial coin offering. However, the crypto exchange is simply issuing the token out to anyone who carries out a transaction on the exchange. In essence, for each transaction fee paid by a user to Fcoin using ethereum or bitcoin, the user gets a 100% value returns in the platforms token. Not only that, the exchange posits that for all the ethereum and bitcoin it receives as transaction fees every day, 80% will be reallocated in BTC to users who continuously hold their FTs for the whole day.

Within just one month of the exchange’s official launch, different questions from various quarters have been raised as to the authenticity of its transactions and if traders have not just been using bots to get FT coins. Zhang debunked the fake transactions allegations and expressly confirmed the authenticity of all the transactions carried out on the platform.

Model critics

A notable critic of Fcoin revenue model is Zhao Changpeng, Binance’s founder, who has raised controversial issues on the exchange’s revenue model. For one, Zhao stated that the model wasn’t an entirely new one as it was just a different from of initial coin offering. Taking to his Weibo account sometimes this month, Zhao wrote that paying transaction fees to the platform with bitcoin and ethereum and getting an 100% return with the platform’s token was simply just buying their token with bitcoin and ethereum and there was no difference between that and ICO.

Zhao also raised issues of the likelihood of price manipulations on the platform. He suggested that since the exchange wouldn’t be making revenue from fees paid for transacting on the platform and its reliance would majorly be on profits gotten from the token prices, there was a high probability that the price of the tokens would be manipulated so more profits could be made.

Still commenting on their revenue distribution model, Zhao raised a similarity between the model and receiving BTC as interest for users holding FT tokens. According to Zhao, people may find the idea of merely holding token and receiving dividends whenever others carried on transactions attractive. He, however, raised a rhetoric asking how long people can continue transacting for someone else to enjoy the dividends.

However, amid the different controversies surrounding Fcoin’s revenue model, it will be interesting to note that OkEx, a trading platform based in Hong Kong, announced last week that it would also be launching its own revenue program based on an adoption of the trans-fee mining revenue model.