Two relative newcomers have hit the top cryptocurrency exchange rankings in terms of daily volume, overtaking such industry stalwarts as OKEx, Binance and Bitfinex. Overtaking is putting it mildly, as the Singapore-based CoinBene clocked over $2.1 billion, more than doubling the 24 hour volume of OKEx, which barely eclipsed the $1 billion mark. Another new player, the Hong Kong-based Bit-Z comfortably sits in the second spot, with 24 hour trading volume well over $1.5 billion, according to CoinMarketCap data.
The reason behind such a surprise emergence is pretty simple – a new business model that is different from all other traditional crypto exchanges. The so-called “trans-fee mining” sees exchanges adopting what you could call a more user-friendly approach and moving beyond traditional fee-taking model. In the trans-fee model crypto exchanges issue their own tokens as a way to encourage customers to trade on the platform.
In the case of Bit-Z, the exchange plans to release 300 million of its own BZ tokens. The clients, trading on Bit-Z will still have to pay transaction fees in bitcoin or ethereum, however the fee will be fully reimbursed to a customer in BZ tokens once the transaction is complete.
The companies have only launched their services in the last few days but the public interest proved to be overwhelming, as the trading volumes in the new exchanges soared beyond expectation. Nonetheless, the new model has already faced criticism, particularly from established players within the crypto exchange market.
Zhao Changpeng, CEO of Binance, likened the trans-fee model to an ICO, posting on Weibo that, “You pay transaction fees to the platform with BTC and ETH. 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?”
He also went on to predict possible manipulation that the new model supposedly enables, claiming that, “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?“
Mr. Changpeng was referring to FCoin, a Chinese exchange, using a trans-fee model. While prominent sources, such as CoinMarketCap are not tracking its data yet, Chinese media outlets suggest its 24-hour trading volume could be a staggering $5.6 billion. The company operates its own FT Token that is capped at 10 billion. 49 percent of the supply is held for the exchange and its investors, while the remaining 51 percent is distributed to the public.
Another controversy associated with the budding model is that it could encourage users to create fake transactions just to obtain the exchange tokens. Questions about sustaining the model in long-term have also been raised. Nonetheless, there is a new player making waves in the market and the old guard is definitely keeping their eyes open.
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I have been following the crypto markets since mid 2017, just in time to witness the incredible surge of the digital asset industry. Fascinated by the potential of blockchain technology I’ve started to dig deeper and that’s how I ended up meeting the Toshi Times team. I hold a Political Science degree, therefore the crypto regulation development is particularly interesting for me. I’m also heavily involved with music, running my own label, a YouTube channel and working with distribution. People call blockchain the ‘Fourth Industrial Revolution’ and I believe it will change our daily lives in the coming years and we will have the front row seats to witness it.