Jian Zhang, the founder of controversial cryptocurrency exchange FCoin, has recently argued it is a misunderstood invention, just like any other novelty that’s still in its early stages. Per his words, the project is a way for him to pay tribute to Bitcoin creator Satoshi Nakamoto “for the beginning of this new era.”

As CryptoGlobe covered, FCoin has been embroiled in controversy after it was found on a Chinese crypto market aggregator that its trading volume is often above $5 billion per 24-hour period. Its owes its trading volume to a “trans-fee mining” revenue model, which sees it turn crypto trading into mining, as the platform rewards users with its own FT token.

The platform essentially reimburses trading fees paid in BTC or ETH with its FT tokens, until 51 percent are distributed to the public. The remaining 49 percent are to be held by the exchange and its investors. Presumably to incentivize holding, it also distributes 80 percent of the transaction fees it collects in BTC or ETH to token holders.

During an interview with Mars Finance’s Fred Wang, Zhang responded to what the interviewer described as FCoin’s “seven sins,” which were created based on the criticism the controversial exchange has received. These included potential wash trading within the platform, allegedly being a pyramid scheme, and running a “disguised ICO,” as stated by Binance CEO Changpeng Zhao.

In response, Zhang defended the cryptocurrency exchange’s model and said he doesn’t agree with any of the “seven sins.” As for wash trading, he defended the platform’s “trans-fee mining” model stating:

The essence of “transaction is mining” is that we return FCion Token (shares in an exchange center) with transaction fees, making traders the owner of the exchange center, which is the fundamental purpose of the design.

Jian Zhang

As for running a pyramid scheme or manipulating the FT token’s price, he argued that the interviewer’s readers should refer to bitcoin’s history, as there are people who still think BTC is a pyramid scheme.

Addressing Changpeng Zhao’s criticism, Zhang said that it “is the most funny and ridiculous,” as Binance itself was funded through the ICO of its BNB token, which as covered has been bucking the bearish trend. He added that unissued FT tokens can’t be used to determine transaction volumes or dividends, as they don’t exist yet.

When confronted with FCoin’s incredible trading volume, Zhang argued that the platform’s data can’t be false as the exchange is “distributing transaction fees, which are actual real money.” He added that as the website develops, it’ll reach full transparency. As to why the exchange can’t be found on common data aggregators like CoinMarketCap and CryptoCompare, he said:

CoinMarketCap is in and of itself a very slow website, it’s quite mysterious and I think you all know it. I know one of its founders, but we don’t have time to talk. They seem to have some of our data and they might enter the exchange center pretty soon.

Jian Zhang

During the interview Zhang noted that people “won’t be able to understand FCoin” if they don’t perfectly understand the flagship cryptocurrency bitcoin. The platform’s FT token, he said, is set to “transform producer-consumer relationships between service providers and users.”

FCoin’s Revenue Model

During the interview, Wang asked the former Huobi CTO about the crypto exchange’s revenue model, as Binance’s Changpeng Zhao argued it could easily be copied and reportedly called on other companies to do so. Since then, several exchanges have indeed adopted it.

As covered at least two exchanges used the model to surpass Binance’s trading volume. Hong Kong-based Bit-Z and Singapore-based Coinbene briefly posted trading volumes well over $1 billion thanks to the “trans-fee mining” model.

Per Zhang, there’s a “very obvious” barrier stopping exchanges from adopting the model: their technical capacity.  He argued other exchanges wouldn’t be able to handle the $5 billion trading volume his exchange did in only 24 hours.

FCoin’s FT token itself has been extremely volatile, as one token traded between $0.01 and $1.25 since the platform launched last month, thanks to its extremely rapid growth. Zhang justified these fluctuations as it is a “new phenomenon, a new ‘species’” that people still “don’t know how to price.”

He added

If you look back at history, all new things were not recognized at the beginning. Many were believed to be fraud. Jack Ma was recognized as a fraud when he first promoted the internet in China.

Jian Zhang

When confronted with FT’s dividend-sharing model and the possibility of it being a security, Zhang noted there’s a specific strategy being developed, that’ll be released later on. He noted, however, that the token is like a “stock of the future” and that as such it “doesn’t make any sense for us to regulate something in the future with existing laws and rules.” In the future, he claimed, markets will be regulated by “public, autonomous regulation.”

High-Frequency Traders

FCoin’s trading volume is likely being inflated by high-frequency traders, a type of algorithmic traders that use powerful computers to transact a large number of orders in a small amount of time. Per the interview, once FCoin’s commissions start dropping, these may turn to other, more lucrative markets.

When this happens, the FT token’s value may drop significantly, potentially leading to the platform’s demise. Per Zhang, these traders won’t leave, and in fact “more types of transactions will flow in,” as the platform doesn’t yet have a lot of institutional investors.

According to Chinese crypto market data aggregator Fexixiaohao, FCoin’s 24-hour trading volume was of 25.5 billion yuan (roughly $3.8 billion). Its most popular pair if FT/USDT, with 97 percent of its trading volume.