Category Archives: FCoin

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CoinGecko Report: 4 of Top 5 Coins Post Year-on-Year Returns, “Trans-Fee” Mining on the Rise

Cryptocurrency ranking and evaluation site CoinGecko released its 2018 Q3 report on Tuesday, in it noting that four of the top five cryptocurrencies have posted positive year-on-year gains.

The one exception to this is Ethereum (ETH), falling 22% below its value this time last year. The report suggests that the cause of this decline can be put down to movements in the initial coin offering (ICO) market; overall, there has been a slowdown, while there has also been an ETH selloff by fundraising teams to store their value in fiat.

Bitcoin (BTC) outperformed Bitcoin Cash (BCH) through the year, with gains of 52% to BCH’s 28%. Ripple did better than both coins, however, increasing in value 186 %, while EOS succeeded in the highest gains, pushing an impressive 700% year-on-year return.

On exchanges

CoinGecko’s report also outlined some notable changes in the area of cryptocurrency exchanges. The new controversial strategy of so-called “trans-fee mining” has increased significantly during this quarter. This technique uses client trading activity to create the exchange’s native token as a repayment of transaction fees. Out of the top 30 exchanges, 12 now operate using a trans-fee system.

The relatively new platform Fcoin was the first to start this practice, with more prominent exchanges such as Bitforex and ZB copying the new fee model.

Q3 has seen cryptocurrency exchanges’ trading volumes show ”strong growth”, while those that operate trans-fee mining actually growing at a faster rate in the short term. They do, however, appear to be sacrificing long-term or sustained growth in trading volumes with that model as enthusiasm dissipates and volumes drop off.

The quarter was also marked as ”highly volatile” in terms of exchange volumes. The aggregate number of exchanges has increased by 65 in Q3, similar to the figure of 63 in Q2.

 

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Ethereum Transaction Fees Hit $5 Record High as Network Clogs

Ethereum average transaction fees reached a record high of USD 5.53 on 2 July 2018, beating the previous record of USD 4.15 on 10 January 2018, far higher than the transaction fees between USD 1 and USD 2 during the CryptoKitties craze in December 2017 which caused a major backlog on the Ethereum network. The cause of the current spike in transaction fees, which is ongoing as of this writing on 4 July 2018, is FCoin’s voting process for listing new cryptocurrencies on their exchange.

FCoin is a new cryptocurrency exchange that launched in China during May 2018 and has seen its trading volume quickly grow to billions of dollars per day. The reason FCoin has become so popular so quickly is its transaction fee mining, where users are compensated with the exchange’s native cryptocurrency, FT, for trading fees. This basically makes the exchange feeless, and trading is the only way to ‘mine’ FT, so people are making as many trades as possible just to acquire FT. Exchanges like Coinbene and Bit-Z also achieved high trading volume by offering transaction fee mining.

The specific way FCoin is causing Ethereum transaction fees to skyrocket is its voting process for new cryptocurrencies to be listed on the exchange. Cryptocurrencies with the highest number of cumulative deposits from unique addresses will be listed, and people seem to be gaming this system by creating numerous new Ethereum addresses. Furthermore, FCoin requires users spend at least 85 gwei for gas to ensure the deposits are processed, which is much higher than the usual price of 10-20 gwei. Indeed, the Ethereum gas price is now averaging near 85 gwei which is proof that the voting process is dominating network gas prices.

Transaction frequency has hit the lowest levels since November 2017, with fewer than 490,000 Ethereum transactions on 2 July 2018, the same day fees hit record highs. This indicates that people are choosing to send fewer transactions to avoid the fees. This behavior is quite the opposite of early January 2018 when fees hit their previous all-time highs and transaction frequency exceeded 1 million per day.

The current FCoin voting issue and the past CryptoKitty backlog shows how one of Ethereum’s greatest strengths can lead to one of its greatest weaknesses. Ethereum is ideal for running numerous blockchain-based decentralized apps, including exchanges, and any one of these has the potential to clog the network and force transaction fees to levels that hurt the Ethereum economy.

This is probably why Ethereum’s development team, led by Vitalik Buterin, is focusing most of its efforts on scaling to handle more transactions at a lower cost. The primary proposals for scaling Ethereum are sharding the blockchain and switching to proof of stake.

 

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