Trans-Fee
Mining Crypto Exchange 'FCoin' Insolvent After Mistakenly Being Too Generous
FCoin, one of the first
cryptocurrency exchanges to adopt the controversial trans-fee mining (TFM)
model, has paused trading and withdrawals over a shortage of crypto worth up
to $130 million.
In a statement its founder
Zhang Jian, a former Huobi CTO, revealed the exchange’s reserves are down by
between 7,000 and 13,000 bitcoin, worth over $127 million at press time. The
TFM model saw FCoin repay users their trading fees paid in BTC or ETH with
the FT token, and redistribute 80% of the bitcoin or ether it collected to FT
token holders.
In his statement Zhang revealed
FCoin’s system was giving away too many FT tokens in rewards for about a
year, and in response to the tokens’ price dropping the team tried to use
their own funds to buy them back and create demand.
The result, per Zhang, was
users were able to sell their FT tokens while the cryptocurrency exchange
itself was buying them and their value kept on dropping. The former Huobi CTO
is now manually processing users’ withdrawal requests sent via email, and
plans to “switch tracks” to start again an use profits from new ventures to
“compensate everyone for their losses.”
