Trans-Fee Mining Exchanges Have Poor Traffic to Volume Ratios, yet Their Market Share Is Rising

Cryptocurrency exchanges using the trans-fee mining (TFM) revenue model have, according to available data, poor traffic to volume ratios, meaning a small number of traders see large amounts of crypto change hands on their platforms. Despite using incentivized trading schemes to generate 'fake volume' these exchanges have grown their market share.

According to CryptoCompare’s January 2019 Exchange Review, cryptocurrency exchanges using the controversial mining model have grown to represent 15% of the crypto ecosystem’s trading volume, up from 12%. In January alone they traded $25 billion worth of crypto in the first month of the year.

The number one trans-fee mining exchange was CoinBene, which by itself traded $10 billion. It was followed by ZBG, which traded $6 billion, and by EXX, which traded $5.5 billion. These platforms’ trading volumes have grown, although overall crypto exchange traffic went down.

Per the report, traffic notably dropped 13.5% in January, with spot trading volumes accompanying it with a 12.4% drop. The total amount of unique visitors cryptocurrency exchanges received in January was 10.4 million, down from 12 million in December.

Crypto exchanges' volumes and traffic in January of 2019Source: CryptoCompare Research

While their trading volumes are high (red for TFM exchanges), the amount of traffic their platforms see is noticeably low. Traders on these platforms are incentivized by the revenue model to trade large amounts, in order to be rewarded in tokens.

The controversial revenue model was initially introduced by FCoin, which managed to see an over $5 billion daily trading volume at the time thanks to it. Some called it a “disguised ICO” over its nature. Its incentives may be questionable, as CryptoCompare’s report puts it, grouping it to zero-fee exchanges:

Transaction fee mining exchanges rebate 100% of transition fees in the form of their own exchange tokens. This might give traders an incentive to trade more to receive more tokens which often have valuable features such as voting rights on the platform or a dividend. Both of the above can lead to wash trading.

Although these crypto exchanges have large trading volumes, this doesn’t mean their order books are secure. CryptoCompare analysis from October showed that on TFM exchanges it would take a very small amount of their daily trading volume to see prices drop 10% on their platform.

Specifically, an analysis of CoinBene’s order books showed it would take just 0.3% of its trading volume to see the price of a crypto drop 10% on it. In comparison, it would take over 30% of the daily trading volume exchanges like Kraken and Bitstamp see to see prices drop 10% showing much greater stability in the more established and trusted exchanges.

Those Banned From Facebook May Not Be Able to Use Its Cryptocurrency Libra

Facebook’s two days of congressional hearings on the social media giant’s cryptocurrency ambitions seemingly revealed that those who have been banned from Facebook may not have access to Libra.

During the congressional hearing Facebook had to answer some tough questions, and one of them came from Representative Sean Duffy, which asked the company’s cryptocurrency head, David Marcus, who’ll have access to Libra.

The Congressman initially asked Marcus who could use the cryptocurrency, to which Calibra’s CEO answered: “anyone that can open a Calibra account, that can go through KYC [know-your-customer checks] in countries where we can operate.”

Duffy then referenced two individuals banned from Facebook for violating its community guidelines, Louis Farrakhan and Milo Yiannopoulo, and asked whether they’ll be able to use the social media giant’s cryptocurrency.

Marcus ended up replying he doesn’t “know yet,” after seeing Duffy hold a $20 bill and ask hin who can use it. His point was that cash doesn’t discriminate, and that anyone who can hold it can use it.

While throughout the hearing Marcus tried to point out the company will follow appropriate regulations and comply with lawmakers, Duffy responded that a proper answer would be “as long as you abide by the law, you can use Libra.” The fact he didn’t get this answer, Duffy said, gave him “great pause.”

Speaking to The Daily Beast Elka Looks, a Facebook spokeswoman, clarified Marcus addressed the Congressman’s concerns later on in the hearing. She stated:

For Libra, anyone who is engaging in lawful activity will be able to transact on the network. Facebook will have no say. For Calibra, there is no policy in place yet, but we will share it when it is closer to being finalized.

The news outlet adds that Calibra, Facebook’s wallet to send, receive, and hold Libra, doesn’t yet have final terms of service or a privacy policy. All of this means that those who’ve been banned on Facebook may not have access to its cryptocurrency.

As CryptoGlobe covered, Congressman Warren Davidson implied during the hearings Facebook’s crypto is a ‘shitcoin’ as it doesn’t have some of the properties bitcoin has. The Congressman made it clear bitcoin has no central authority that can censor transactions or dilute its value, while Libra has the Libbra Association.