Are new crypto exchanges that you’ve never heard about before repeatedly showing up on CoinMarketCap’s exchange ranking? Don’t be surprised anymore.
The phenomenon is now making headlines again, with Bloomberg recently questioning how it’s possible that a new exchange launched just three months ago already reports a trading volume that exceeds that of the 217-year-old London Stock Exchange.
The new exchange in question this time is Singapore-based crypto-to-crypto exchange BitForex, a new exchange that utilizes a controversial practice known as “transaction mining” to report daily trading volumes in excess of USD 5 billion (USD 3.4 billion at the time of writing.) In comparison, at the time of writing, trading volume at Binance, a major exchange, stands at USD 1.33 billion.
Transaction mining essentially involves returning a portion of the trading fees paid by users when they place orders on the exchange in the form of the exchange’s own token. In extreme cases, such as with BitForex, users can receive tokens worth more than the trading fee they paid, essentially earning free money by generating buy and sell orders on the exchange. Users then follow up and often run trading algorithms designed to generate a large number of orders, inflating the trading volume on the exchange.
Transaction mining is a controversial practice because it only works out in the user’s favor as long as the exchange’s token retains its value. And in order to retain its value, it needs to continuously attract new users to make up for other users who are cashing out. Nonetheless, the practice has been, and is being, used by many of the exchanges.
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https://cryptonews.com/news/fake-trading-volume-a-persistent-problem-in-crypto-2675.htm
