FCoin - a cryptocurrency exchange that applied a controversial transaction fee mining model, suspended transactions and withdrawals due to the discovery of a shortage of cryptocurrency assets with a value of up to USD 130 million.
Zhang Jian - Former CTO of Huobi launched FCoin in May 2018, just wrote a long article on Monday, in which he said that the exchange is currently unable to process users' withdrawal requests due to the amount of Reserve assets are not enough - and the "gap" is estimated at between 7,000 and 13,000 Bitcoin (BTC).
Posts - first be publish in Chinese and later translated on Reddit, is a shocking notice to users in China because of the huge amount of assets that are missing that led to the insolvency of the controversial model - which at one point made FCoin one of The largest cryptocurrency exchanges by trading volume.
Zhang stated in the article that the exchange was neither hacked nor a scam but that it was a problem "too complicated to explain in a sentence."
In a nutshell, he says that the problem comes from an internal system error - over a long period of time, users have credited more mining rewards based on the transaction than they should. Because the company couldn't discover this early enough to fix it, it has grown even bigger since early 2019.
Mining transaction fees
Fcoin started operating around May 2018, it introduced a new model called "transaction fee mining" to encourage users to trade and issue their own internal token, FT.
Instead of launching an ICO or an airdrop, FCoin has issued 51% FT tokens to the public in exchange for making transactions. For example, for each transaction fee that users pay to FCoin as Bitcoin or Ethereum, the platform will refund users 100% of that fee in FT.
Additionally, FCoin will distribute 80% of the transaction fees it earns with BTC and ETH to users who hold FT continuously for a day. This model - albeit criticized for allowing FT manipulation, was quickly embraced by users and led to a disturbance of the charts of exchanges by volume.
However, according to Zhang, FCoin's system errors began to bring more mining rewards to users than they should have earned - starting in mid-2018. The company did not set up a back control system. -end is complete to manage funds appropriately until mid-2019, he said.
As FT prices continued to decline in 2019, Zhang said he and his team bought FT from the secondary market in an effort to increase demand for tokens, which was one of the "critical errors" he made. right.
Zhang said the system issue, along with the "decision error," provided opportunities for users to sell and withdraw more money than was needed on their account balances, which caused the loss of a large number. FCoin's assets on the balance sheet.
The announcement was made just a few days after FCoin suspended its entire platform after discovering the issue of risk control. Zhang said in the post that he will now handle user withdrawal requests made via email himself.
He stated that he would "move the cards and start over," and hoped to use the profits from his new projects to "compensate the people."
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According to CoinDesk
Translated by ToiYeuBitcoin