An unexpected congestion in the Ethereum network has caused a lot of hue and cry among its users and node operators. In the wake of the congestion, ETH prices started sinking and touched a low of $405.29. It turns out that Fcoin, a cryptocurrency exchange, could be the culprit behind Ethereum’s dilemma.
Reportedly, Fcoin implemented a new voting system which supposedly ‘incentivizes a Sybil attack’. A Sybil attack is an act of creating large numbers of fake identities to gain a disproportionately massive influence on a network. MyCrypto called the voting mechanism to be ‘mind-numbingly despicable’ in a recent Tweet.
Mycrypto has been quoted, as saying,”Unsurprisingly, people who are financially incentivized to get a shit-token listed on a shit-exchange are sending these tokens en masse to separate accounts on the blockchain and then to separate accounts on the ‘exchange-who-must-not-be-named’ […] and thus resulting partially (or entirely?) in the network congestion & high transaction fees that we’ve experienced these past few days.”
See Also: FCoin to dethrone other top exchanges? Daily volume rose to $17.3 billion within a month of its launch
Fcoin adopted a new voting system quite unlike the traditional ones normally used by other crypto exchanges. The voting system allows users to vote for tokens to be listed on the platform via deposits. Thus, one deposit equals one vote. As a result, various tokens made deposits for gaining votes leading to clogging of the network.
According to Mycrypto’s tweet, one of the tokens listed on the exchange duped a real token that recently ICO’d.
7/ One of the tokens that was listed is not a legitimate token. I don’t mean that it’s a shit-token (that’s expected).
The token is literally a scam-token capitalizing on the symbol of a real, highly-anticipated token that recently ICO’d but hasn’t distributed yet.
— MyCrypto.com (@MyCrypto) July 3, 2018
A Chinese crypto market aggregator reportedly found the trading volume on Fcoin to often be above $5 billion over a span of 24 hours. The trading volume is attributed to a trans fee mining revenue model. The platform repays trading fees paid in BTC or ETH with its FT tokens, until 51 percent is distributed to the public, making traders the owner of the exchange, FCoin founder Jian Zhang said in an interview with Fred Wang, founder of Mars Finance.
Zhang asserted that Fcoin’s revenue model is just a ‘misunderstood invention’. According to reports, the exchanges which adopted the trans fee mining model saw their trading volumes top Binance. Another cryptocurrency exchange – Coinex – saw its trading volume shoot up by over 24000% in a 24 hour period after embracing the new model.
Image via Shutterstock
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