CoinEx has become the latest cryptocurrency exchange to soar to the top of the volume rankings after adopting the controversial new “trans-fee” mining model.
The previously relatively small exchange, which is owned by Chinese mining pool ViaBTC, saw its 24-hour trading volume balloon enormously from c. $5million yesterday to over $1.27 billion today - according to CoinMarketCap - rising to the number 1 spot on the site’s exchange volume rankings.
The enormous surge follows the UK-based exchange’s release of “Trade-driven Mining” & “Dividend Distribution” model - explained in announcement on their site on Thursday:
“From 0:00 July 1st, 2018 (UTC), CoinEx will adopt a "Trade-driven Mining" method to release 3.6 billion CET for free allocation to CoinEx users. We will calculate 100% of our transaction fee income into CET against the real-time rate and give them away to all traders proportionately to their trading volume.”
A Controversial New Model
This new model is apparently a very similar variant of the controversial “trans-fee mining” model adopted recently by Chinese exchanges FCoin, Bit-Z and Singapore-based Coinbene.
Trans-fee mining involves exchanges looking beyond traditional fee-taking models. Instead, an exchange issues its own tokens which are paid to users in return for their normal transaction fees in cryptocurrency or tokens.
Provoking substantial criticism from media and industry figures - last week saw Binance CEO Zhao Changpeng claim that the new model is in effect an ICO in disguise.
More worryingly for users, the Binance Chief, among others, has also pointed out the enormous potential for manipulation the new protocol offers:
"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?"
Many on social media have also speculated that the sky-high trading volume on these platforms might be indicative of “wash trading”: a tactic - banned in regulated markets - where people use programs to trade with themselves.
With CoinMarketCap establishing a separate “Markets With No Fees” 24h-volume ranking to distinguish these platforms, it remains to be seen whether the new breed of exchange can sustain these astronomical volumes.