Exchanges the Real Winners of Bitcoin Craze

      January 04, 2018 10:54

      Cryptocurrency exchanges are the real winners of the bitcoin craze, and despite tougher regulations in the offing they are laughing all the way to the bank.

      Bithumb, Korea's biggest cryptocurrency exchange, said Wednesday it will hire 400 new staff on top of the 450 it already employs. A hundred of the new workers will handle IT, overseas marketing and legal affairs at headquarters, while the rest will man the call centers. All will be employed on full-time contracts, and 230 existing part-time staff will also be given full-time jobs within this year.

      Work benefits at Bithumb rival those of major conglomerates. Workers get overtime pay, stock options and incentive payments as well as transportation expenses, food stipends, unlimited book purchase credits, fitness club memberships and even oriental medicine treatments and massages.

      Bithumb CEO Jeon Soo-yong said, "We decided to hire many workers to help create more jobs for young people and expand our operations."

      Established in 2014, Bithumb was a struggling start-up until 2016 with annual revenues totaling only W4.3 billion (US$1=W1,066). But it has posted phenomenal growth since then powered by the bitcoin craze. Staff numbers surged from 20 in early 2017 to 450, and last May it moved operations from a small office to an 11-story building in southern Seoul. Now it is eyeing an even larger building.

      Rival Upbit, which opened just two months ago, has been growing at a phenomenal rate as well. Run by a subsidiary of Internet giant Kakao, Upbit claims to be Korea's No. 1 cryptocurrency exchange with 1.2 million subscribers, 1 million daily users and a record daily trade volume of W10 trillion.

      The key to Upbit's success is the wide range of cryptocurrencies it handles -- 120 compared to Bithumb's 12. It appeals especially to investors who trade in altcoin, an even more volatile cryptocurrency than bitcoin.

      Third-ranked exchange Korbit was valued at W140 billion when it was acquired by Internet game developer Nexon in September last year and its value is believed to have surged since then.

      The secret to their success is that they cannot lose, like the bank in a casino.

      Bithumb charges a 0.15-percent transaction fee, around 10 times more than ordinary brokerages charge, and the explosive growth in trading has translated into surging revenues.

      Daishin Securities estimates that Bithumb made W317.6 billion last year from transaction fees. Upbit is estimated to earn W3.5 billion a day and anywhere between W300 billion and W3.7 trillion a year from transaction fees. In contrast, NH Investment and Securities, which employs 2,250 workers, made an operating profit of only W301.9 billion in 2016.

      Virtual currency exchanges make even more money from valuation gains on their cryptocurrency holdings. But they have been accused of being cowboys when it comes to online security, customer protection and management transparency.

      Bithumb's computer networks were attacked by hackers last June, resulting in the personal information of 30,000 customers being leaked. They also suffer frequent outages and errors when their systems fail to handle surging transaction volume.

      Upbit is also receiving myriad complaints about system failures and errors during transactions. Youbit recently went bankrupt after suffering a massive cyberattack believed to have come from North Korean hackers. 

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