Coss vs. Kucoin – A tale of two profit sharing exchanges

 

Today I will be taking a look at two relatively new profit-sharing cryptocurrency exchanges, and seeing how they compare to each other. The two exchanges I will be taking a look at will be Coss, and Kucoin, both of which have their own token.

Profit-sharing exchanges have taken over the crypto world as of late. There has been a bunch of new exchanges utilizing a profit-sharing model, and the second most popular exchange in the world, Binance, had a meteoric rise to the number two slot in just six months.

The profit-sharing model is where a portion of the fees charged by the exchange for buying/selling cryptocurrency tokens, are paid out as a dividend to the holders of the token for that exchange. Both Coss and Kucoin utilize this model, albeit each with a unique spin.

I have personally never used either of these exchanges, so today we will be learning about Coss and Kucoin together.  Coss is ranked as #92 on coinmarketcap exchanges rankings and has had $3,026,135 in trading volume in the last 24 hours. Kucoin is ranked #23 and has had $81,384,994 in 24-hour trading volume.

We’ll start by taking a look at Coss first.

A closer look at Coss

 

Coss is based out of Singapore and held their ICO in August 2017. The ICO was a month-long crowdsale, it was successful at a time when the ICO market started to cool down. They sold 155 million tokens in the presale and token sale, at the price of $0.56 cents apiece. The total supply is 200 million tokens, and there is a circulating supply of 118,810,622 COSS tokens. Coss is an ERC-20 token, and its exchange is built on the Ethereum network.

Coss started out as a one-stop interface for buying and selling crypto via their exchange and offering a variety of crypto-related services.  Coss actually stands for “Crypto One Stop Solution”. So far they have not executed any of their services very well.

The team realized they had too much on their plate and decided to focus on the exchange aspect of their business plan. They are still not executing very well. They started out offering only blue-chip cryptocurrency pairings and failed to capture a userbase since they were a new exchange and simply couldn’t provide liquidity or trading volume, compared to well-established exchanges.

They just could not attract traders with such low volume. Coss then began offering exclusive pairings with small-cap ERC-20 tokens in a bid to get more users to the platform, but their daily trading volume remains pitiful, at three and a half million over the last 24-hours. The platform currently has 120 tradeable pairings, with an assortment of popular crypto and fiat combinations.

Next, we’ll take a look at the fee structure.

The Coss fee structure

The Coss platform uses a variety of ways to generate revenue to be paid out to token holders. The Coss whitepaper describes the fee structure in the following way:

“Withdrawal fees: The cryptocurrency withdrawal fees generate the revenue for the platform, however, most of the fees are used by the network to process the withdrawal. Throughout this process, no direct revenue is generated, which means that no amount of the withdrawal fee is shared with the DAO token owners.

Exchange transaction fee: COSS utilizes the maker-taker transaction fee scheme, that generates a pure revenue for the platform. The fee is charged from both members of the traded pair. The fees begin with 0.2% of the taker and maker’s fee, and end at 0.04% derived from transactions; 50% of this revenue is shared with the DAO token owners.

Payment gateway: The merchant selling goods by means of the payment gateway or the POS creates the revenue for the platform. The COSS merchant platform operates on a 0.75% fee derived from each transaction; The fee is generated in the cryptocurrency that is used for that respective transaction. The fee is generated in both cryptocurrencies traded within a pair. In the case of a FIAT pair, only the fees paid in cryptocurrencies will be distributed to the token holders. 50% of this revenue is shared with the DAO token owners.”

Coss also has an affiliate program but it only gives you discounts on fees while using the platform, rather than actual income, so the incentive to promote Coss isn’t really there, and it’s user base and trading volume reflect this.

Coss management has had issues

Coss has a model which has so much potential but is very poorly executed due to poor management. Crypto exchanges have been seeing record numbers of traders and trading volume, yet Coss is struggling in the number 92 spot with almost no volume. They have a nice intuitive interface, but nobody is actually taking advantage of it. If you were an investor in the public crowdsale, you’d be underwater right now.

The team ambitiously bit off more than they could chew trying to be an all in one crypto resource, but doing none well. Once they were confronted with the reality of implementing all the ideas in the whitepaper they had no choice but to pivot and focus on the exchange. The exchange business is competitive, with no shortage of rivals. We’ll see if Coss can manage to have some staying power long enough to have some volume and liquidity enter the platform as more users begin to adopt it. Next, we’ll take a look at Kucoin Shares.

 

Kucoin has almost the opposite tale as Coss. Based in Hong Kong, the platform has been extremely successful, rapidly rising to the number 23 spot on the coinmarketcap rankings. Kucoin’s success has been based on the fact that they have been aggressively adding new trade pairings of many altcoins.

Couple that with their affiliate program which rewards participants in actual revenues, not just a savings on trading fees, and we have a winner. Kucoin also has a token buyback scheme, but it seems to be more symbolic than actually having an effect on price. They only buy back an estimated $2 worth of their tokens for every million. Kucoin also pays it’s dividends daily as opposed to the weekly payments schedule of Coss.

The Kucoin Fee Structure

Kucoin charges a flat fee of 0.1 percent, on all trades. They use 50 percent of the fees collected to pay dividends to token holders, and  40 percent goes the affiliate program to pay commissions to users for referrals the remaining ten percent goes to the Kucoin platform itself. Kucoin’s referral program has been a key contributor to its success.

The Kucoin referral program has several tiers of commissions that it pays out to the participants, which is actually derived from the 40 percent allocated for the affiliate program. The tiers give commissions to you for every referral, then every referral from your referral’s referrals, underneath, creating a commission upstream 3 layers deep.

Kucoin is the people’s exchange

Kucoin has a total token supply of 180,730,576 KCS, but a circulating supply of only 75,730,576 KCS. They launched in August 2017, and have already gained a user base of four million users. They have successfully added 133 coins with 334 trading pairs for maximum user convenience. In just six short months they have already climbed to the number 23 spot on coinmarketcap.

Their amazing success is reminiscent of Binance’s rise to popularity. Kucoin also recently added AML/KYC to its platform in an effort to be more compliant with banking practices. Kucoin plans on reducing the payout of dividends from 50 percent to around 15 percent, and the process began in March 2018. The reduction will be gradual and never will it be reduced to less than 15 percent. The KCS token is at $3.82 as of this writing. Kucoin also offers a discount on fees to holders of the KCS token.

So far Kucoin has been pretty popular for offering coin pairings that cannot be found on other exchanges, with exotic small-cap altcoin pairings being one of the key reasons traders seek out the platform. It’s been a favorite of traders on Twitter and Reddit. As long as Kucoin continues with a secure platform offering unique pairings I believe they will continue to be successful.

Will Coss and Kucoin Shares be classified as securities?

With all the regulatory uncertainty and lack of clarification on the matter by the SEC and other oversight agencies, its been cause for concern not just for Coss and Kucoin, but for a whole slew of so-called “utility tokens”.  Both Kucoin and Coss stand to be labeled securities if the SEC decides to intervene. They both clearly pay dividends, like a security.

The SEC has made it very clear that they have not seen a single ICO that isn’t a security, and just by the very nature of both platforms, both tokens would quickly fall into this category. This has made some holders of each token concerned for what the future could hold, envisioning a nightmare scenario where token prices plummet due to the platform being classified as an unregistered security.

Both tokens have plans to decentralize, into DAO based organizational structure. A DAO is a Decentralized Autonomous Organization, and supporters see the DAO as a future model for censorship-resistant businesses. A DAO would be an organization that operates via smart contracts, with no central authority or leadership. Participants would cooperate towards a shared goal, similar to the way the open source software development process functions, and governed via smart contracts.

Can Coss and Kucoin successfully make that transition if the authorities decide to impose a regulatory framework onto their business models? We’ll just have to wait and see what the authorities decide to do.

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