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| September 19, 2018

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Trump Has Controversial Words About Hurricane Maria

September 12, 2018 |

With a powerful hurricane bearing down on the southeast coast , President Donald Trump on Tuesday turned attention back to the federal government’s response to Hurricane Maria in Puerto Rico a year ago, deeming it “incredibly successful” even though a recent federal report found that nearly 3,000 people died, the…
Newser

Transaction Fee Mining Exchanges: Highly Popular, Highly Controversial

September 1, 2018 |

Transaction Fee Mining Exchanges: Highly Popular, Highly Controversial

You might not have traded on Fcoin or Bitforex, but you’ve probably heard their names mentioned in crypto trading circles. These exchanges are at the forefront of a relatively new business model known as transaction fee – or trans-fee – mining. While innovative, the token model deployed by these platforms is not without its controversies.

Also read: How Coinmarketcap Incentivizes Exchanges to Report Fake Volume

What Exactly Is Transaction Fee Mining?

With a conventional cryptocurrency exchange, a maker and taker fee is levied on each side of the trade. The taker’s fee is typically higher, averaging 0.5-0.75%, while the maker (the person selling the asset, and thus providing liquidity) might pay closer to 0.25%. Ordinarily, this fee is deducted at the point of the trade being executed. It’s normally collected by the exchange in the form of ETH or BTC, or BNB if trading on Binance. Transaction fee mining exchanges take a markedly different approach.

Former Huobi CTO Zhang Jian Launches FCoin, Gaining Investments from Top Venture Capital Firms
Fcoin uses a trans-fee mining model

Transaction fees are the primary way by which exchanges make their money. Trans-fee mining exchanges flip that model by handing all of the fees back to traders in the form of a native token. In fact, during promotional periods – typically when launching the exchange – these platforms might even offer a rebate of greater than 100%. In other words, traders are technically profiting, in the form of native tokens, for each trade they made. It sounds too good to be true, and like all things that fall under this banner, it is. But first, let’s consider the upside to trans-fee mining.

Trans-Fee Mining Is a Good Way to Get Noticed

Fcoin didn’t invent trans-fee mining, but it was the first exchange to popularize it. The platform, under the guidance of former Huobi CTO Jian Zhang, rolled out its native token in early June. As Crypto Exchange Ranks (CER) reports, “as time went on, Fcoin’s trade volume started to fade, and the exchange slid down the ranks on CMC…On Aug 8, noticing the trend of rivals offering more than 100% trade fees reimbursement, Fcoin decided to implement their own 10% bonus.” As a result of this initiative, Fcoin’s volume leapt by some 7,000%, to over $ 2 billion, as can be seen below:

Transaction Fee Mining Exchanges: Highly Popular, Highly Controversial
Note the sudden increase in Fcoin’s volume in early August.

From the perspective of exchanges that have pioneered the trans-fee model – namely Bitforex, Fcoin, Coinex, Coinbene and Coinsuper – it’s proven an effective means of gaming the system. Cryptocurrency market aggregators such as Coinmarket Cap have long excluded zero-fee exchanges, as their data skews the rankings. But because exchanges like Bitforex and Fcoin technically charge fees, albeit with all tokens collected from this disbursed to the community, they can leap to the top of the charts, and in doing so, gain shed-loads of new inbound referrals.

The other benefit for the exchanges is that this system provides a means of bypassing an ICO. Rather than deal with the hassle and legal issues associated with holding a tokensale, they can simply distribute tokens to early adopters, with high frequency traders rewarded the most. Traders are still paying for these tokens, however, in the form of ETH or BTC that must be paid to the exchange in return for native tokens.

Trans-Fee Mining Is Ethically and Financially Dubious

“Honest Coinmarketcap” Claims to Provide Accurate Cryptocurrency DataTo go from “obscure exchange” to “top of Coinmarketcap” virtually overnight is certainly an effective way to get noticed. But there’s a difference between gaining recognition and being recognized for all the wrong reasons. The nature of trans-fee mining models, which incentivize early adopters, often using referral schemes, and whose tokens typically rocket in value before crashing hard, has all the hallmarks of a ponzi scheme. It is no coincidence that several of the exchanges using this model, including Bitforex, have been called out for reporting fake volume.

In a study conducted into the practice of trans-fee mining exchanges, CER found that 80% of the platforms it investigated promised to reimburse more than 100% in trading fees: Bitforex (120%), Fcoin (110%), Coinbene (130%), and Coinsuper (125%). In addition, Bitforex and Coinsuper promise to use 80% of transaction fees earned to buy back exchange tokens, while Fcoin and Coinex promise to redistribute trading fee revenue in the form of dividends.

Transaction Fee Mining Exchanges: Highly Popular, Highly ControversialCER concludes: “It’s obvious that the implementation of “trans-fee mining” likely leads to a huge ramp-up of trade volume, but charts suggest that such a pump is very unlikely to be the result of a natural influx of traders. Using trading bots to inflate volume, this could be someone eager to collect reimbursed tokens via “trade mining” and dividends distribution.”

Exchanges are entitled to adopt the token model they believe best serves their needs and those of their community. But traders should be cautious of the reported trading volume and promised dividends of this new breed of exchanges, whose operators will do whatever it takes to claw their way to the top of the heap.

What do you think of transaction fee mining exchanges? Let us know in the comments section below.


Images courtesy of Shutterstock, and Crypto Exchange Ranks.


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The post Transaction Fee Mining Exchanges: Highly Popular, Highly Controversial appeared first on Bitcoin News.

Bitcoin News

TSA chief defends controversial Quiet Skies surveillance program

August 14, 2018 |

At a gathering of corporate travel managers, the head of the Transportation Security Administration defended a once little-known program to target airline passengers whose travel patterns raise suspicions.

During an on-stage discussion before thousands of travel managers and in an interview, TSA…


L.A. Times – Business

Bayer to halt sales of controversial Essure birth-control implants in the U.S., its last market

July 21, 2018 |

Pharmaceutical giant Bayer said Friday that it will halt sales of its controversial Essure birth-control device in the United States at the end of the year, bringing to a close a protracted battle over an implant that thousands of women blame for serious health problems, including persistent pain…


L.A. Times – Business

Controversial Trump Judicial Nominee Abruptly Withdrawn

July 19, 2018 |

The White House on Thursday withdrew one of President Trump’s judicial nominees minutes before he was scheduled for a Senate confirmation vote, CNN reports. In what the AP calls a “stunning move,” Senate Majority Leader Mitch McConnell announced on the Senate floor that he was pulling Ryan Bounds’ nomination to…
Newser

Supermodel Elle Macpherson linked to controversial anti-vaccine doctor

July 19, 2018 |

Australian supermodel Elle Macpherson is reportedly dating controversial doctor Andrew Wakefield who came under scrutiny for link vaccines to autism.
FOX News

CNN

Israel passes controversial ‘nation-state’ bill with no mention of equality or minority rights

July 19, 2018 |

Making no mention of the values of equality and democracy, Israel has passed into law a highly controversial bill that serves to define the nature of the state of Israel, with critics slamming it as the “nail in the coffin” of Israeli democracy.
CNN.com – RSS Channel – World

Israel Passes Controversial ‘Jewish Nation’ Law

July 19, 2018 |

Israel’s parliament approved a controversial piece of legislation on Thursday that defines the country as the nation-state of the Jewish people but which critics warn sidelines minorities. The government says the bill, which passed the Knesset by a 62-55 vote, will merely enshrine into law Israel’s existing character. Prime Minister…
Newser

Royal Find: the ‘Most Controversial Chocolate Ever Made’

July 14, 2018 |

When Eddisons CJM put a tin of World War I chocolates up for auction last month, there was one person who wasn’t terribly impressed. “A lady from London wrote and said, ‘Hundred-and-three-year-old chocolate is not so special,'” auctioneer Paul Cooper tells the Daily Express . That’s because that woman had…
Newser

Controversial shopping mall partly collapses in Mexico City

July 13, 2018 |

A newly opened shopping mall on Mexico City’s south side partly collapsed Thursday after structural problems led the mall’s operators to quickly evacuate the area, and no injuries were reported.
FOX News