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A new China-based cryptocurrency exchange that launched in May is gathering critical reviews from the Chinese media because of its “trans-mining model” of revenue generation. The exchange’s trading volume witnessed an instant spike, surpassing some of the biggest exchanges in the world. The company combines trading with crypto mining, which is being criticized by major exchanges like Binance.

A New Revenue Model Shocks the Industry

FCoin works on a nuanced revenue model known as “trans-fee mining.” Under this model, users get a chance to trade and mine cryptocurrencies simultaneously that could lead to FT token ownership, which is the native token of the company.

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As soon as the service was launched, it reportedly passed the daily trade volume of top exchanges. Even though prominent third-party sources like CoinMarketCap are not mapping the exchange’s data yet, its Chinese peer suggests that FCoin experienced $5.6 billion in trading volume over 24 hours. This is more than the combined volume of the top 10 exchange platforms registered on CoinMarketCap.

The company’s “trans-fee mining” model is being touted as the reason behind this surge. The company operates a native token called FT Token that is capped at 10 billion. While the company maintains 49 percent of the circulation under its maintenance, which is to be held for the exchange and its investors, the remaining 51 percent is circulated to the public.

However, the tokens are being issued to the public without holding an ICO. Users will be provided with these tokens in exchange for their trading activity on the exchange, turning traders into miners. Their whitepaper suggests that for every transaction fee that a user pays in Ether or Bitcoin to the exchange, a 100 percent value will be transferred in the form of FT tokens.

The exchange further states that it will distribute 80 percent of its total daily transaction fee in Bitcoin to users who hold their FT tokens throughout the day.

Controversy Strikes the Exchanges

Founded by Zhang Jian, who is the former CTO of Huobi, the exchange is being criticized by the media as well as prominent exchanges. Chinese media outlets are questioning the legitimacy of these transactions. They ask whether traders are generating fake transactions using bots to receive the FT tokens. Zhang has denied all the accusations and claims all transactions are genuine.

The exchange also caught the attention of Binance founder and CEO Zhao Changpeng, who said that the company’s coin distribution method is an ICO.

He wrote:

“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?”

Changpeng also accused the exchange of price manipulation. He added:

“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?”

He continued his sharp criticism of the company’s model, saying that, if people are paid dividends to hold on to their FT tokens, there will be lack of incentive for them to continue trading.

His words seem to have fallen on deaf ears as a prominent Hong Kong-based exchange OKEx has announced that it is launching a program to help 100 new exchanges in adopting the “trans-fee mining” model on Wednesday.

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