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Blockchain Cryptocurrency Research Transaction Fee Mining F coin Bancor

Trans-Fee Mining May Prove Yet Another Unsustainable Model

07/09 – 07/15

Trans-Fee Mining May Prove Yet Another Unsustainable Model
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WEEKLY RECAP

  • Total market cap. reached $250.68 bn (a 9.8% decrease), where 7 day trading volume dropped 16.4% for top 100 crypto


WEEK AHEAD

  • 18 July: The Cboe XBT expiration date for BTC
  • 18 July: The United States Congress to hold the hearing “The Future of Money: Digital Currency”


THOUGHTS OF THE WEEK

A security breach  at Bancor network (BNT) directed investors’ attention towards decentralized exchanges this week. On 9 July, BNT experienced a security breach whereby ETH, Pundi X (NPXS) and BNT tokens worth US$23.5 mn were stolen. As noted in the Chart of the Week, the price of BNT once dropped to BTC 0.000324 after that the incident was revealed.

It is worth noting that Bancor was able to recover BNT tokens (worth US$10 mn) immediately and no user wallets were compromised, thus the total damage was limited to US$13.5 mn. To mitigate security breaches going forward, BNT will create a blacklist that tracks offending addresses and stolen funds in real time. Furthermore, an emergency fund is being set up to compensate project owners should any similar incidents occur again in the future.

This Bancor incident further stoked the debate surrounding centralized exchanges. Speaking at “TechCrunch sessions: Blockchain 2018” in Zug, Vitalik B. did not hold back when he blasted centralized crypto exchanges and wished they “burn in hell as much as possible”. Binance’s Changpeng Zhao fired back at Buterin’s statement saying that “there is no absolute decentralization”, stressing that centralized crypto exchanges have played a vital role in sustaining the liquidity and adoption of cryptocurrencies, and further claiming that the industrial development for cryptocurrencies would have been 10x slower without them.

Decentralized crypto exchanges like Bancor are still struggling to achieve competitive transaction volumes. Despite the high listing fees charged on ICOs, centralized crypto exchanges are able to maintain high liquidity by cooperating with high-profile market-makers, for instance Binance’s partnership with Founders Bank in Malta. Further competition is emerging from crypto exchanges such as F Coin that are adopting the “Trans-Fee Mining” model, the 24h trading volume of which is currently 4.15x larger than that of market leader Binance. We do not however believe in the sustainability of this great growth, and we expect that Trans-Fee Mining may prove to be yet another unsustainable model.

 

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