FCoin, a newly established China-based exchange launched in May, has went popular with its new “trans-fee mining” revenue model. However, this business model is seen as controversial by majority of the industrial insiders.

Founded by Zhang Jian, former CTO of Huobi, FCoin claims to be the first fully transparent cryptocurrency in the world. This exchange issued its own cryptocurrency – FT (FCoin Token) which has spiked 12400% from its initial ICO price at 0.00002 ETH in about 15 days. According to its white paper, the firm will reward more than half of its FCoin Tokens to users by returning transaction fees and it is will distribute 80% of the revenue to FT holders. Holders will be airdropped the rewards of all trading pairs including BTC, ETH, LTC, USDT, ZIP, FT, etc.

Bai Shuo, former chief engineer of Shanghai Stock Exchange (SSE) indicated that, the “trans-fee mining” is more likely to be a reasonable promotion model. It may boost the flow for exchange, but its effect on the trading liquidity is limited.

The “trading is mining ” concept is actually over drafting the future strength of the exchange by giving benefits to users in advance. The good aspect of this model is that the exchange users may surge in a short time, but the bad news is that it may triggers users to create fake trading volume in order to get profit and that cannot last for a long time.

Binance CEO Zhao Changpeng (CZ) also doubt on the way FCoin attract investors. He argued that, the FCoin’s ‘trading is mining’ model constitutes not only a “disguised ICO”, but also a more “expensive ICO”.

Bai Shuo listed 3 main effects caused by FCoin business model: first of all, there will be more and more fake volume tradings that may disturb the market; secondly, a large amount of user migration may take place; thirdly, FCoin generate discussion on the ownership of exchange governance structure in the industry.