New Skill to Boost Crypto Trade Volume
For the longest time, the volume of trade coming into cryptocurrency exchanges has been the measure of success among entities that offer virtual currency trading. After all, given the presence of such currencies in the global markets and the skepticism of governments, central banks, policymakers, lawmakers, and the general public, trade volume seems to be the reasonable measure for success.
Certain exchanges are said to be using various measures just to raise the numbers throughout the years including zero-fee transactions and encouraging algos. Also, there were rumors some even commissioned their respective market makers to constantly trade and count both sides of the trade. In simplest words, intensify the competition and the trade volume, of course. Others began paying traders for them to use their platforms instead of waiting to reap gains due to organic growth.
It was Fcoin that supposedly invented a platform founded by Zhang Hian, Huobi’s chief technology officer. The transaction fee mining scheme is aimed at assisting clients offset trading fees by providing them exchange tokens. This system, although a new development in the crypto scene, has precedents in other fields.
In some instances, foreign exchange and stock brokers offer cashbacks or other incentives including free iPads based on volume to bolster client trading. Tokens, however, are possibly a type of dividend-bearing securities. They are also given control in the exchanges. This is not usually occuring without crypto tokens.
A handful of exchanges that use the trans-fee model have emerged after Fcoin such as Singapore-based Coinbene and Hong Kong-based Bit-Z. Such platforms have managed to amass massive trade volume numbers in the short-term because of employing this method. Therefore, Binance, which offers its own token but distributed it in an initial coin offering (ICO), is the most distressed company with this development.
“If an exchange’s survival depends largely on the price rise of its own token rather than on transaction fee earnings, it has to drive up the token price. In this regard, less experienced traders and retail investors can hardly have the upper hand in the trading competition with those crypto whales, especially the exchange whale,” Changpeng Zhao, Binance’s chief executive officer, emphasized, assimilating this practice to a disguised and expensive virtual coin offering.
“If you use BTC or ETH to pay the trading fees on cryptocurrency exchanges, the trading platforms will refund you in the form of exchanges’ own tokens,” Zhao said.
There is no difference between exchange rolling out its own ICO and purchasing exchanges’ own coins with bitcoin or ethereum, he added.
“If a new exchange use up to 49% of the $ 50 billion company’s valuation to issue its own tokens, are you willing to buy? Now, they sell the exchange’s tokens to you at this price. In contrast, Binance was valued only $160 million when it launched ICO,” Zhao claimed.