According to figures from CryptoCompare’s December 2019 Exchange Review, the trading volume of cryptocurrency exchanges using the controversial transactions-fee mining (TFM) revenue model dropped by 30% in December.
Other statistics from the report show that TFM exchanges traded a total of $108.87 billion in December, representing 25% of the total volume from all exchanges.
The largest TFM exchange, Bitforex, saw its volume rise roughly 5% and was responsible for $35.65 billion in trading volume. The other two biggest TFM exchanges weren’t as fortunate, as CoinBene traded $27.3 billion but was down 11.6%, while Bibox traded $18.26 billion and saw its trading volume drop a drastic 38.9%.
First popularized by FCoin, TFM exchanges have become increasingly popular over the last couple of years. TFM exchanges have their own native token, which is given to users as a reward every time they perform a trade.
Due to an increased profit margin, a growing number of traders are electing to use this type of exchanges. Reports have also shown that exchanges that adopt the TFM model have their volumes grow substantially, despite unusually thin order books and low traffic.
Despite the success, many industry experts criticize the TFM model as being financially and ethically dubious. They believe it fosters dishonest activity, as it creates a great incentive for traders to collude and participate in wash trading to increase their earnings.
Another significant claim is that adopting a TFM model is a way of bypassing conducting Initial Coin Offerings (ICOs), as the exchange can release their own token without having to go through the lengthy regulatory process necessary for the token sale.
Featured image via Pixabay.