The controversial FCoin exchange came under fire last week as users accused the platform of clogging the Ethereum network. This week is no different, as the exchange has still been met with widespread skepticism.
Ethereum Network Clog Continues
Last week saw the lambasting of FCoin, as cryptocurrency companies like MyCrypto and ICO Drops brought attention to the exchange’s questionable business practices.
Ethereum network is under heavy load due to the voting system for listing on FCoin GPM called "The cumulative deposit number ranking". Voting will takes place every day until the rules are changed pic.twitter.com/7br1TxIrWe
— ICO Drops (@ICODrops) July 2, 2018
According to MyCrypto, a cryptocurrency wallet service, FCoin incentivized its users to deploy thousands of unneeded transactions on to the Ethereum network.
The wallet service issued a series of tweets regarding the issue, writing:
“Basically, they want their users to “vote” for tokens to be listed. Instead of a traditional voting mechanism, they have decided to vote via a “cumulative deposit number ranking. Yup… you heard that right. One deposit = one vote. You’ll never believe what happens next”
This “mind-numbingly despicable” method of voting caused Ethereum fees to rise by over tenfold, with the average transaction fee moving from 20 cents to a high of $5 dollars on Monday.
As a direct result of the network clog, Binance had to temporarily increase gas prices on ERC-20 and ETH withdrawals until the network clears.
Although transaction fees have since seen a rather sharp decline, falling from $5 to $1.5, many expect for FCoin to continue to enlist this far from optimal voting mechanism.
Why “Cumulative Deposit” Instead Of Normal Voting?
Binance, the world’s most popular exchange, has become well-known for offering a “community coin of the month”, allowing its users to vote for a token in exchange for 0.1 Binance Coin.
This eases blockchain stress, as all voting is done on the exchange’s servers, instead of a decentralized network like Ethereum.
So why didn’t FCoin employ a less intrusive voting method similar to Binance’s “community coin of the month” system?
MyCrypto chalked up the “cumulative deposit” mechanism to an absurd marketing and PR strategy that FCoin may be putting to practice. In a Tweet MyCrypto wrote:
“As we’ve been looking into the recent network congestion / high gas prices, one of the more interesting things to come to light involves a random exchange (whom we will not name as this is likely part of their “PR strategy”)”
You know what they say, “there is no such thing as bad publicity.” Some hypothesize that FCoin has taken this concept and has brought it to extreme levels, angering hundreds of thousands of Ethereum users for a chance at notoriety in cryptocurrency circles.
Absurd Trading Volume Figures: CoinMarketCap Puts The Foot Down
Despite being met with harsh criticism, FCoin has still posted absurd volume figures. Daily volume figures recently peaked at 17.3 billion U.S, but have continued to hold above the equivalent of one million Bitcoin (6.5 Billion) for the past week. At the time of press, FCoin currently has a collective volume of over $7.6 billion according to Coingecko.
This has led some to wonder, why is there so much volume pouring into a relatively unknown exchange?
Users took to Reddit and Twitter to speculate about the source of these mysterious volume figures. Reddit users, ‘WealthJustin’ and ‘SirRandyMarsh’, alleged that these figures weren’t accurate, and were falsely reported by FCoin. Another Reddit user, ‘GoodGuy91’, reckoned that these figures were the result of wash trading, where market manipulators trade assets back and forth generating artificial volume.
While both allegations could be likely candidates, it is likely that the latter is more accurate. Although FCoin takes a 0.1% market maker and taker fee, the exchange reimburses FCoin trader in full, in the form of their in-house token. This allows for users to essentially create billions of dollars of volume in exchange for FT tokens.
CoinmarketCap, a premier cryptocurrency statistics site, has become well-known for offering vital cryptocurrency figures. In an attempt to hold this reputation, CoinMarketCap has delisted FCoin from the exchange roster, excluding statistics from the Chinese exchange.
It is unclear whether FCoin will smarten up in the future, but for now, the exchange is still expected to fill up the Ethereum network will unwanted transactions.