Profit-sharing exchanges allow you to to accrue passive income by simply holding the exchange’s tokens in your wallet.
The idea of sharing exchange fees with token holder is, in our opinion, a fantastic opportunity for investors. Therefore, today we will be discussing our extensive comparison of COSS and Kucoin – the two competitors in the space.
YOU WILL LEARN:
What Is A Profit-Sharing Exchange?
Is Passive Income A Good Investment?
Is KuCoin Better Than COSS?
- What Is A Profit-Sharing Exchange?
- KuCoin Project Overview
- COSS Project Overview
- KuCoin vs COSS
- Are They Both Illegal Securities?
- Where Can You Buy KuCoin & COSS?
- COSS Since Our Last Video (For Our Followers)
- Follow Future Posts
1. WHAT IS A PROFIT SHARING EXCHANGE?
An online exchange is a website which allows you to convert one Cryptocurrency for another e.g. if you want to ‘exchange’ your Bitcoin for Ether.
For providing this service, an exchange will usually charge around 0.1% – 0.3% fee.
You can check out a more in-depth list of exchange fees here.
Usually, exchanges keep these fees to themselves. However, during the past year, we have seen the arrival of profit-sharing exchanges.
Who Do They Share The Fees With?
Profit-sharing exchanges share fees with their token holders.
The incentive for the exchange owners is two-fold;
- ICO – The exchange are able to sell their tokens – which should carry future value – in an ICO in order to raise funds and build the platform
- Customer Loyalty – The structure also encourages customer loyalty because, all traders who hold tokens will essentially be paying some of their fee back into their own pocket with each trade they make on the platform.
The incentive for token holders should be relatively obvious – they are able to collect regular payouts for simply holding the tokens. Here at CryptoGurus, we are huge fans of passive income so the premise behind profit-sharing exchanges is very appealing to us.
Let’s now move onto our brief project overview of KuCoin.
2. KUCOIN PROJECT OVERVIEW
The first distinction to make when explaining the KuCoin project is between the exchange name (KuCoin) and the associated tokens (KuCoin Shares).
‘KuCoin shares’ are the tokens that investors are able to purchase on exchanges and entitle them to the profit-sharing of the exchange.
- 50% of fees – Token Holders
- Up to 40% of fees – Referrals From Token Holders
- 10% of fees – KuCoin Exchange
Let’s hypothetically say a trade occurred and an associated fee of $100 was charged.
From this, $50 would be distributed between all token holders. $40 would go towards whoever referred the person (via the referral scheme) making the trade and $10 would be kept by the exchange.
Token holders are paid in whichever tokens a trade consists of e.g. if the pair ETH/BTC is traded, token holders will all receive a small cut of both ETH and BTC.
If ARK/ETH is traded, token holders will receive small amounts of ARK and ETH. As such, token holders will accrue many different types of Cryptocurrencies over time.
What If Nobody Referred The Trader?
What would happen in the situation where a trader signed up to the KuCoin exchange without being referred by someone else?
This is an answer that we searched for but were unable to find. Therefore, we believe that this 40% probably instead goes to the exchange, bringing about the following fee split model:
- 50% of fees – Token Holders
- 50% of fees – KuCoin Exchange
We do find it slightly shady that we weren’t able to find information about this because this will actually be a relatively common occurrence that someone signs up without being referred.
The Referral Scheme
While we’ve stated above that 40% of the fees goes toward the person that referred the trader, this was said to simplify the above explanation and isn’t entirely accurate.
Instead, this 40% fee is actually dispersed through 3 different layers of referrals. For the most easily understood description of this, we recommend scrolling down to the picture below – pictures are always easier to understand than text!
However, we’ll also explain it here for those who prefer to read:
- 20% of your direct referral fees will be paid to you
- 12% of second degree referral fees will be paid to you
- 8% of third degree referral fees will be paid to you
- In total, a maximum of 40% of fees will flow back up through the referral scheme
As we said, it’s best to use the diagram below for the easiest explanation!
KuCoin’s Token Buyback Program
10% of net profits will go towards KuCoin’s token buyback program.
With these profits, the team will buy their shares back on exchanges and burn them (get rid of them indefinitely). As a result, this should reduce the overall supply and should bring the price down in the long-term.
The aim is to reduce the total supply by 100 million, leaving a total of 81 million tokens outstanding.
If this sounds like a big positive to you, wait until you read ‘Our Thoughts’ on this where we’ve run the calculations and it’s clear that this element has only been thrown into the platform to impress investors who don’t dig deep enough to see how worthless it actually is!
What Is The Fee Charged On KuCoin Exchange?
KuCoin are charging a flat fee of 0.1% for every trade that occurs on the platform.
At the beginning of this article, we emphasised how we are big fans of passive income and, in particular, the idea of a profit-sharing exchange. As always, we’ll highlight our opinions on some of the points listed above.
The payout structure is excellent – offering 50% to platform users incentivises them to remain loyal to the exchange and the additional 40% for the referral scheme encourages people to invite others, creating a network effect.
The team takes a relatively low cut of regular fees but still keep a large enough cut to align their incentives with those of token holders.
On the other hand, we find it misleading when they claim that they only keep 10% of the fees for themselves. After all, this only occurs when a new person joins and is tied to three higher levels of referrers – many people may sign up to the platform without a referrer.
Also, we’re not a fan of the fact that token holders are paid in many different tokens. While it’s a cool concept, the result will most likely be users having to individually convert all of these into the currencies that they actually wish to hold.
Having said that, we always try to present some negativity in our analysis to highlight some flaws behind projects in our analysis. In all honesty, the payout structure is excellent and it’s the main reason that we believe KuCoin has excellent long-term prospects.
As mentioned, this is an excellent idea as it encourages more users to educate others about the project and greater exposure can lead to a more successful project – if the team is capable of growing the platform in line with user acquisition.
Token Buyback Program
At first, we believed that this is a good addition to have – a token buyback program nearly always adds a positive element to any project… and then we ran a few calculations.
KuCoin are claiming that they will use 10% of net profits to fuel their token buyback program so how much will this really contribute?
Let’s assume that KuCoin collect 10% of the fees per trade as they say that they will. They will have expenses with their operations so let’s also assume that they have a net profit margin of 20%.
A fee per trade is 0.1%. Collecting 10% of this will mean they receive 0.01% per trade.
With a profit margin of 20%, the net profit would be 0.002% per trade. If 10% is pledged towards the token buyback program, that will equate to 0.0002% per trade.
If our calculations are correct, the token buyback program would contribute around just $2 per $1 million trading volume.
This is a great example of a team throwing in something which sounds promising to investors but has very little real value.
You can buy KuCoin here if you wish.
3. COSS PROJECT OVERVIEW
The COSS project has a very similar outline to their plan. Therefore, in order to avoid wasting the reader’s precious time with extensive details of a similar project, we will briefly outline the COSS project and then discuss the differences in the following section.
COSS is a profit-sharing exchange also which shares 50% of fees with token holders. The remaining 50% of fees are retained by the COSS team.
Payouts are made weekly to token holders and all ERC-20 tokens can easily be converted to Ether at the click of a button.
COSS charge a variable fee that ranges from as low as 0.04% up to a maximum of 0.2% based on your 30-day trading volumes.
See below for more details on the fees paid:
In a 30 day period if you trade x amount you’ll be charged x percentage fee:
e.g if you trade $0-$5,000 in a 30-day period, you’ll be charged 0.2% per trade.
$0 – $5000 = 0.2% fee
$5,001 – $10,000 = 0.18% fee
$10,001 – $25,000 = 0.16% fee
$25,001 – $50,000 = 0.14% fee
$50,001 – $100,000 = 0.12% fee
$100,0001 – $250,000 = 0.10% fee
$250,001 – $500,000 = 0.08% fee
$500,001 – $1,000,000 = 0.06% fee
$1,000,0001+ = 0.04% fee
COSS run a referral scheme. With each person that an individual refers, 10% of their 30-day trading volume is added to yours which gets you closer to being in the next category of cheaper fees (as seen above).
For more details, you can check out our COSS video recently ** Please ignore the sound quality, the professionalism wasn’t great when we began on YouTube **.
Later on in the section titled ‘COSS Since Our Last Video’, we will discuss our opinion on the COSS project specifically further.
For now, we will begin with the comparison between KuCoin and COSS.
You can buy COSS here if you wish
4. KUCOIN VS COSS: WHICH IS BETTER?
Before we begin this section, it’s essential to highlight the price difference first.
At the time of writing, KuCoin Shares have a market cap of $57 million while COSS has a market cap of $5.2 million.
Therefore, the question isn’t really whether KuCoin is better – the question is whether KuCoin is 11x better (57/5.2 = 11)?
Please bear this is mind as we go through the following section:
What Are The Similarities?
- 50% Profit-Sharing – Both projects share 50% of fees with token holders
- Timing – Both projects launched at similar times
What Are The Differences?
- Price – KuCoin has a market cap 11x the value of COSS. Therefore, when making a comparison, KuCoin should be considerably better in order to justify this. This will be analysed shortly
- Referral Schemes – The referral scheme of COSS assists traders with reducing their own fees but they receive no other financial compensation. KuCoin offer up to 40% of the actual fees to referrers
- Buyback Program – COSS has no buyback program. KuCoin is instilling a buyback program using 10% of net profits
- Exchange Interfaces – The COSS exchange has an easy-to-use interface but lacks some of the more advanced features of KuCoin such as the ability to add trading indicators to the exchange’s graphs
- Daily vs Weekly – COSS pays out users weekly whereas KuCoin pays daily
- Fees – COSS charges a variable fee based on trading volumes, KuCoin charges a flat fee
- Current Trading Volumes – KuCoin is 16.8x higher for 24 hour trading volumes
- Selecting The Right Listings – Correctly picking the correct new listings is where has KuCoin excelled and COSS struggled so far but this could be about to change
- Ether Conversion – COSS offers relatively easy conversion from other currencies to Ether, KuCoin does not as far as we’re aware
The KuCoin referral scheme is far better than COSS. KuCoin referrers receive real, financial payouts instead of just a discount on fees. A referral scheme can be a very effective tool at increasing exposure for a Cryptocurrency so it is evident that KuCoin’s strong referral scheme is a clear advantage for the platform.
KuCoin is implementing a buyback program whereby they will be using 10% of net profits to buy tokens and burn them. COSS will not have such a program. However, if you remember from before, we pretty much ripped KuCoin’s token buyback program to shreds.
We can’t really give COSS a win here because they aren’t offering a buyback program but we certainly prefer their honesty in this, rather than KuCoin claiming their program will raise prices when the whole token buyback program will contribute a pitifully small amount (assuming our calculations are correct).
Due to their variable fee COSS could turn this element into a huge advantage for attracting serious traders. Let’s explain:
Traders tend to have very high trading volumes – duh – so with COSS’ variable fee based on 30-day trading volumes, many traders could find themselves paying significantly less fee per trade on COSS compared with other platforms. With traders making many trades on a daily basis, this difference can seriously add up over time.
On top of this, traders can become token holders and, therefore, they will effectively be paying 50% of this small fee back into a pot with which they share also. The combination of these two things, could be huge for COSS.
Not to mention, that attracting traders to the platform, is ideal also because this would vastly increase the trading volume and thus the weekly payouts to token holders.
However, there is a big IF here. Over the past few months, expectation around COSS has been relatively high yet they have failed to live up to promised potential.
For them to attract traders, they would have to manage two things:
- Increased Trading Volume – Traders needs significant liquidity so they can buy and sell coins very rapidly. Liquidity comes through high trading volumes and, without that, traders simply won’t use COSS. This may seem like a chicken and the egg scenario but we will shortly discuss how COSS can build their initial trading volume through clever targeting of smaller coins.
- Improved Interface – Traders need to see trading tools on the platform so that they can add their indicators in order to judge prices. COSS’ interface is currently very poor but we will be discussing very soon about their plans to upgrade it.
COSS has a much more simplistic style, while KuCoin is more advanced and faster. We would argue that, for this reason, COSS might be better for beginners who haven’t experienced much trading before while KuCoin exchange would be better for everyone else.
The issue for COSS arises in the fact that not many beginners are likely to be using their site – beginners will most likely be located on the big exchanges e.g. Bitfinex, Bittrex and thus COSS are somewhat tailored to an audience they are unlikely to ever cater for.
KuCoin, on the other hand, has a very fast interface with relatively advanced trading indicators that is likely to draw more advanced traders to the platform.
A positive for COSS is that they have recognised their need for an upgrade of the interface and investors can at least feel assured that this improvement is coming soon.
Daily vs Weekly
The benefit here is pretty obvious – who would prefer to wait a week instead of receiving payment immediately? As long as KuCoin are able to consistently manage this, they have the upper hand but this is a pretty insignificant point in all honesty.
Current Trading Volumes
The higher the trading volume, the higher the fees which means more payouts to token holders.
With the difference in 24 hour trading volumes that can be seen in this picture, it’s clear to see why KuCoin is priced so much higher than COSS.
KuCoin’s trading volume is 16.8x greater than COSS so it could potentially be argued that the price difference could be even higher than 11x.
Note: This doesn’t quite encapsulate the entire picture though as this would be making the assumption that the same trading volume for the two exchanges means the same payouts. In truth, due to the two exchanges having different fee structures, this won’t exactly be the case.
Also, markets are forward-looking and the counterargument could be made the COSS has significant potential – but has been wrongly focused on elements other than their exchange thus far – and, therefore, could have similar potential with more focused management which is exactly what we should soon see.
Selecting The Right Listings
This is arguably the most important element for a new exchange to get right in order to grow quickly and is one of the key reasons why KuCoin has been more successful than COSS so far.
What we mean by this is the following:
There is little point in a new exchange listing ETH/BTC because investors already have the option to trade this pair on many far more reputable exchanges with much higher liquidity so why would they choose to trade it on a new exchange?
Instead, newer exchanges must grow by focusing on coins which aren’t widely traded but have relatively strong demand e.g. Red Pulse on KuCoin.
As we can see from the screenshots, KuCoin is the only exchange to be trading Red Pulse which is very impressive considering it has a market cap of $22 million and a 24hr trading volume of nearly $750k.
By listing this coin alone, KuCoin have gained over 3x COSS’ trading volume. If COSS had landed this deal, the token price would have increased 4x logically.
COSS, however, have failed to list any coins exclusively – coins that anyone wants at least – and have mostly just added coins which are readily available on larger exchanges.
As a result, little trading volume has been seen on the platform outside of trading their own native tokens.
If we compare the two Twitter feeds from the exchanges, it’s immediately obvious to see that COSS have previously mis-targeted this while KuCoin are adding new listings daily.
A New Start For COSS?
So far, this has painted a very negative outlook for COSS and rightly so – the management has been very poor over the past few weeks. However, we believe that this could actually be their turning point. COSS have recently listed the recent Hydrominer ICO exclusively on their exchange and will be listing Gatcoin also.
While these aren’t superstar ICOs, they do clearly represent a change in tactics for COSS – they have now understood that they must build from the bottom and work their way up instead of attempting to directly compete with the big exchanges from the beginning.
Personally, we believe that this intelligent shift in tactic has come around in line with COSS’ recent announcement that they would focusing on their exchange with more of their time.
While the team has been a disappointment thus far, this is a positive sign which we believe many investors may have looked over – explaining why prices are so low.
Edit: Since writing this article, the price of COSS has spiked 22% in the past 24 hours which could have been a result of this realisation from traders.
Another positive aspect that can be seen for COSS is actually mentioned above when we discussed Red Pulse: ‘If COSS had landed this deal, the token price would have increased 4x logically.’ This sentence alone shows the potential that the COSS tokens have while they have such a cheap price.
What if they landed 3 of these deals over the next month? It’s a big IF again hence the project is undoubtedly high risk – high reward.
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OUR THOUGHTS – CONCLUSION
KuCoin has a significantly better interface and referral program and they have been far more successful than COSS in their plans thus far. COSS has been a disappointment so far and massively underperformed their potential.
However, this is all in the past and, our aim as investors, is to look to the future. KuCoin has very strongly leadership and have shown all the signs of a project which could excel even further in the future, potentially hitting newer heights as they grow more.
The ability of COSS to build a community has never been in question – as seen by their significant number of people signed up to the platform – but their decision-making regarding listing choices has been misguided.
As such, COSS has previously been somewhat disappointing – hence it’s priced 11x lower than KuCoin – but is now more focused on their exchange more than ever and is finally exhibiting signs of intelligent leadership.
Without price factored in, KuCoin is the obvious selection here. However, with price accounted for, we would say that both projects are potentially appealing.
KuCoin is a safer option due to its higher price tag, while COSS is riskier but has a higher potential reward due to its lower price tag.
As a result, either could be selected for a portfolio dependent on risk appetite and, arguably, both are good selections. Whether you decide to invest in both, just one of them or neither, we always recommend remaining well diversified with a portfolio – especially with such low market cap coins which carry much more risk!
It would be amiss not to discuss some of the risks involved with both coins surrounding the hot topic of securities in the Cryptocurrency space so we will now move onto that.
5. ARE THEY BOTH ILLEGAL SECURITIES?
To give a bit of background information, currently there are no regulations in the Cryptocurrency space for the majority of countries. Therefore, neither coins are at immediate risk.
However, when reading about issues in Cryptocurrencies such as the recent lawsuit laid upon the Tezos foundation, it’s a stark reminder that regulations will eventually be introduced.
This Won’t Be The Wild West Forever.
As such, there is concern around both of these project due to the fact that some would say their tokens fall under the category of ‘security tokens’.
Issuing of securities is illegal in other industries except for accredited investors only. In accordance with this, some countries may decide that these two projects are in violation of the law as a result.
How Will They Combat This?
Both projects are already aware of this issue and have addressed it in their plans which is why they both plan to transition to become decentralised autonomous organisations (DAOs).
If this were to occur, governments would have great difficulty affecting either project as there is no single source of failure with a DAO.
Whether this will work or not is something we simply cannot predict at this stage. In fact, whether or not they will even face a real threat is something nobody can predict – the regulations for the vast majority of countries haven’t even been announced yet.
On top of this, we would be surprised if either project hasn’t already begun other plans to ensure they’re in accordance with securities laws as they are both attempting to build real projects for the long-term.
However, this is still a consideration that all investors should bear in mind so don’t say we didn’t warn you!
6. WHERE CAN YOU BUY BOTH COINS?
The easiest and cheapest place to buy both coins is on their own exchanges which you can find through our links below. Please note, these are affiliate links so if you would like to show us support, you can use the links below and we receive a small payout. If you don’t wish to, feel free to not use the links below!
7. COSS SINCE OUR LAST VIDEO (FOR OUR FOLLOWERS)
A few weeks ago, we put out a video discussing COSS and our belief that it’s valuation would increase. As a result, several of our investors jumped on-board and have been worried as the price has fallen since.
This is our message to all of these followers.
We have to admit that we jumped in on COSS at the wrong time and we apologise if anyone who follows us did the same – it had dipped back to $0.12 after increasing above $0.20 so we believed that this retracement presented an opportunity.
In reality, the poor focus from the management of the project has dragged the project down even further.
What Do We Think Of The Project Now?
It’s easy to see prices falling and lose faith in it, as a result. We’re only human and we’ve done the same thing at times.
If you wish to sell at this point, we completely understand.
Personally, we aren’t selling our tokens because we believe the project is still undervalued and we’re finally seeing some positive signs from the management after weeks of very poor performance!
Believe us, we’ve felt the pain as COSS’ price has dropped just as much as you!
While we’re not adding to our positions at this time, we are also not planning to sell either.
As we said before, this was always going to be a high risk/reward investment which is why we always recommend that investors remain well diversified and never commit too much to any position, especially risky ones!
We’re In This Together
That’s the end of the article! Thanks for stopping by and don’t forget to check out our other articles for regular Crypto/ICO reviews and market updates.
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Disclaimer: None of the above is financial advice. Always do your own research.
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This article has been provided by the CEO; Tom Heavey.