The hot topic recently has been about relatively new exchange coming directly from China – FCoin. There are two main issues connected with FCoin. One has been the dramatic rise in eth gas prices and the other is the high trading volume on the exchange.
High Gas Prices and Clogging of the Network
The reason for high gas prices and clogging of the ethereum network is a controversial practice employed by FCoin to get listed on their exchange. Users are encouraged to vote for their favourite coin the via a process called “cumulative deposit number ranking”. What this means is that one transaction = one vote. Communities that want to get their coin listed on the exchange will end up sending many, many, many small transactions.
With all these unnecessary transactions flooding the network, transaction costs have soared for legit users. Many people have taken to Reddit and Twitter to complain. However, the strategy for FCoin seems to be having the desired effect. They are getting their name out there and having people talk about the exchange. Although slightly underhanded and inconsiderate, it seems this is the marketing strategy that FCoin wants to employ.
Trading Volumes that Exceed the Biggest Exchanges
The second issue with FCoin exchange is the really high transaction volumes. As of press time, the exchange had a 24h trading volume of over $7.3 billion. That is over six times the trading volume of Binance which is widely considered to be the biggest cryptocurrency exchange in the world.
These absurd numbers have led the public to accuse the exchange of engaging in wash trading. Wash trading is “a form of market manipulation in which an investor simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace”. Again, as with its listing strategy, this seems to be the method used by FCoin to drum up publicity for its exchange.
One might wonder why people will make all these trades, especially since FCoin charges a 0.1% market maker and taker fee. The answer lies in their FCoin Token (FT) and how they have set up their system to distribute revenue back to FT holders. The exchange basically offsets the trading fees with the FCoin Token. This also has the secondary effect of raising demand for FT, causing it to pump.
Its not certain if this is just an isolated incident regarding one exchange or if this will be the new wave of marketing for the exchanges to come. Questionable marketing strategies have led to major inconveniences for crypto users and this will be an interesting topic to follow in the coming weeks.
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