KuCoin is a cryptocurrency exchange founded in 2017. KuCoin is a full-featured spot trading platform for many digital assets and cryptocurrencies, including Bitcoin, Ethereum, NEO,
EOS, Tether, KuCoin Shares, and many more. Kucoin has its own cryptocurrency - KuCoin Shares (KCS). ^[1]

On October 3, 2020, KuCoin announced that they had recovered $204 million and were ready to start taking deposits after being attacked by hackers.^[10]

Overview

The Kucoin team launched the KuCoin exchange app for iOS and Google Play for Android to keep users trading on the go.^[2]

KuCoin charges a flat trading fee, meaning the fees for takers and makers do not differ. The exchange boasts a flat fee of 0.1%, which is lower than the global industry average of 0.25%. As for withdrawal fees, the exchange charges 0.0005 BTC.  NEO and GAS are free to withdraw from KuCoin.^[4][2]

The exchange supports several ways to buy cryptocurrencies with fiat via KuCoin, including direct bank card purchase via Simplex, Banxa, or PayMIR integrations, P2P desk, and fast buy feature. The fees on those transactions may vary according to the chosen payment method, but should not exceed 5 - 7% on any given day. ^[2]

For example, Simplex typically charges 3.5% per purchase, while Baxa is said to charge 4 - 6% on top of the total transaction amount. For P2P marketplace purchases, the fees depend entirely on the chosen payment method and processor rates.^[1]

The exchange supports a referral program as well as other promotion programs. One of these includes a 30% discount that is applied to users’ fees if they use the exchange’s local cryptocurrency, KCS.^[2]

Funds for KuCoin development were raised via an ICO, which lasted from August 13, 2017, to September 1, 2017. During that time, KuCoin issued its native KuCoin Shares (KCS) tokens, which are used to receive special offers, trading discounts, and a part of exchange profits. The crowdsale was a success, as KuCoin raised nearly USD 20,000,000 in BTC (at the time) for 100,000,000 KCS. The ICO price for a single KCS was 0.000055 BTC.^[1]

KuCoin Account Verification

On November 1, 2018, KuCoin implemented know your customer (KYC) verification. Nevertheless, account verification at KuCoin is entirely optional. It means that a user does not have to verify their identity to trade, however, verified users get benefits such as increased daily withdrawal limits or simplified account recovery in case of a lost password or two-factor authentication device.^[1]

KuCoin has three verification levels:

• Unverified account. It requires email verification, lets a user withdraw up to 2 BTC per 24 hours.
• Verified Individual account. Requires a user to submit their identity details such as ID or passport, as well as their country of residence, and increases their withdrawal limit to 100 BTC per 24 hours.
• Verified institutional account. Increases a user's withdrawal limit to 500 BTC per 24 hours.^[2]

In June 2020, KuCoin announced its partnership with crypto on-chain analytics and surveillance company Chainalysis in order to increase its compliance efforts further.^[4]

KuCoin Futures

KuCoin launched its Futures (previously known as KuMEX) platform in mid-2019. It allows users to trade Bitcoin (BTC) and Tether (USDT) margined contracts with up to 100x leverage. It means that a user can trade up to USD 10,000 worth of contracts with just USD 100 in their account. There are two versions of KuCoin Futures - one designated for beginners (lite version) and one oriented towards more experienced traders (pro version).^[2]

The Lite interface lets a user trade USDT-Margined Bitcoin (BTC) and Ethereum (ETH) contracts, as well as BTC-margined BTC futures contracts.^[1]

The Pro interface is more advanced and lets a user switch between the following contracts:

• USDT-margined: BTC perpetual, ETH perpetual
• BTC-margined: BTC perpetual, BTC Quarterly 0925, and BTC Quarterly 1225

KuCoin Programs

KuCoin also offers its users the ability to employ their digital assets in a variety of staking and lending programs. These include:

• KuCoin Lend. A user can earn interest on their digital assets by lending them out for the funding of margin accounts. The loans last for either 7, 14, or 28 days, and a user can earn up to 12% annualized interest rate from their holdings. The lending service accepts Tether (USDT), Bitcoin, Ethereum, EOS, Litecoin, Ripple, Cardano, Cosmos, TRON, Bitcoin Cash, Bitcoin SV, Ethereum Classic, Tezos, Dash, Zcash, and Stellar cryptocurrencies.
• Pool-X. Pool-X is a next-generation Proof-of-Stake (PoS) mining pool - an exchange designed to deliver liquidity services for staked tokens. It lets a user earn a high yield for PoS cryptocurrencies like EOS, TOMO, Zilliqa, Cosmos, KCS, Tezos, 0x, IOST, TRON, and many others. Pool-X is fueled by Proof of Liquidity (POL), a decentralized zero-reservation credit issued on TRON’s TRC-20 protocol.
• Soft staking. As a part of Pool-X, soft staking lets a user earn rewards for holding coins and tokens. A user can get up to 15% annual yield, with low minimum deposits.^[7]

KuCoin Spotlight IEO platform

Aside from trading, staking, exchange, and swapping services, KuCoin also has its initial exchange offering (IEO) launchpad, aka KuCoin Spotlight. Here, a user can invest in new crypto projects vetted and supported by KuCoin. The launchpad has already funded several IEOs, namely, Tokoin, Lukso, Coti, Chromia, MultiVAC, Bitbns, Trias, and VELO. To participate in KuCoin’s IEOs, a user needs to have a verified account. Most of the offerings use KuCoin Shares (KCS) as the main currency of the crowdsale.^[2]

KuCoin Shares (KCS)

KuCoin Shares (KCS) were used to fund the creation of the exchange. In total, 200,000,000 KCS were issued and distributed to founders, private investors, and regular investors. Funds issued in the first and second phases are subject to four (September 2, 2021, for phase one) and two-year lock-up periods (September 2, 2019, for phase two).

ICO Issuing Mode

KCS holders have the following benefits:

• Receive daily cryptocurrency dividends, which account for 50% of the collected trading fees. To obtain the daily bonus, users would need to deposit their KCS into the Kucoin Platform. Then the platform will conduct accounting and award bonuses based on the KCS holdings in the user's account at 0:00 (UTC+8) that day and all the trading fees charged to the platform on the previous day. Then the bonus gained by users will directly put to their Kucoin accounts in the corresponding currency. For instance, If the ETH-BTC cryptocurrency pair rate is 0.063 on the platform and the daily exchange volume is 30,000 BTC; based on the 0.1% rate from each side, the platform shall charge 30 BTC and 476 ETH as trading fees. The bonus for every 10,000 holdings would be 10,000 by 100,000,000 (0.01%). So that the daily bonus from this very cryptocurrency pair is 0.003 BTC and 0.0476 ETH (1 BTC and 17 ETH annually).
• Get a trading fee discount (min. 1000 KCS for 1% discount; max 30,000 KCS for 30% discount). The system takes a snapshot of users' KCS holdings daily at 00:00 (UTC +8) to calculate the applicable discount rate.
• More trading pairs, including Bitcoin, Ethereum, Litecoin, Tether, Ripple, NEO, EOS, Credits, Go.
• Experience exclusive KCS holder perks and offers.

The total supply of KCS is 180 million, but only about half of those are currently in circulation. The initial supply of KCS was set at 200 million, but the number has been declining as roughly 10% of all the exchange profits each quarter is used to buy back KCS and burn them in order to support higher prices. This buyback and burn will continue until just 100 million KCS remain. KuCoin has named this the “buy-back” program.^[10]

The initial distribution saw the founders of KuCoin receive 35% of the KCS coins, 15% went to angel investors in the exchange and the remaining 50% was sold to investors. According to the KCS whitepaper the 35%, or 70 million KCS, that was distributed to the founders is locked up until September 2, 2021. In addition to that, the 30 million coins given to angel investors were also locked up, but only until September 2, 2019.

Lock-up Period

The 70 million KCS issued by the founders in the first phase should be subject to a four-year lock-up period from Sep 2nd, 2017 to September 2nd, 2021. Founders are prohibited to assign or sell their KCS holdings in any way before September 2nd, 2018. Team members can only assign or sell 25% of their largest historical exchange volume in 365 natural days from Sep 3rd, 2018 to the end of the lock-up period. The 30 million KCS exchanged by the consultants and angel investors in the second phase were subject to a two-year lock-up period from Sep 2nd, 2017 to Sep 2nd, 2019. Holders were not allowed to assign or sell their KCS holdings in any way before September 2nd, 2018. They could only assign or sell 50% of their largest historical exchange volume in 365 natural days from September 3rd, 2018 to the end of the lock-up period. The 100 million KCS issued by public users suffered no lock-up period and opened for exchange from Sep 2nd, 2017.^[8][9]

Buy-back Mechanism

After the Kucoin platform opened for use, at least 10% of the net profit were applied to the buy-back of KCS every quarter. The KCS retrieved through buy-back will be destroyed immediately. The buy-back record will be released to the public at the first time, so that users can review it via blockchain explorer, to ensure the open and transparent nature of the whole process. The team will continue the process until 100 million KCS destroyed.^[7]

Team

• Michael Gan - CEO
• Eric Don - COO
• Top Lan - CTO
• Kent Li - Operations & Maintenance Director
• John Lee - President of the Business Operations Group
• Jack Zhu - Marketing Director
• Linda Lin - Chief Legal Consultant

Investors

In November 2018, KuCoin announced $20 million (USD) round A funding from IDG Capital and Matrix Partners.

• IDG Capital
• Matrix Partners

Controversy

The email from GoDaddy to KuCoin, showing its domain locked by court order in Singapore

Corporate Restructuring

On October 14, 2019, directors of the Singapore-based entity PhoenixFin Pte Limited — the legal entity behind KuCoin and owner of the KuCoin.com domain — resigned. There was no public announcement made about these resignations, but records filed with Singapore's Accounting and Regulatory Authority show that co-founders Michael Gan and Tang Ke, as well as Lian Meng, a representative of financial backers IDG Capital, all resigned as directors of PhoenixFin Pte Limited. Just two days later, on October 16, 2019, the KuCoin name and logo trademark was transferred from MEK Global, a Seychelles-based entity that had previously inherited the trademark from PhoenixFin Pte Limited. The trademark ended up with another Seychelles-registered entity, FortuneIcon, which has the exact same physical address as MEK Global.^[6]

With the co-founders of KuCoin and PhoenixFin Pte Limited no longer at the company, new directors such as Chinese resident You Au were appointed. On November 20, 2019, the ownership of PhoenixFin Pte Limited was transferred from PhoenixFin Limited, a Cayman-based holding company, to You Au. He had been appointed to the board at the time of the October 14 corporate restructuring, but his prior relationship to KuCoin is unclear. He is not mentioned on the exchange’s website, in any of its marketing material, in the March 17, 2020 press release, or in the 2017 White Paper which described the exchange. Although Johnny Lyu, the CEO of Phoenix Pte Limited, was appointed CEO of KuCoin Global on March 17, the ultimate owner of KuCoin Global seems to be You, Au.

On March 17, 2020, KuCoin issued a press release from Victoria, the capital city of Seychelles, describing a sweeping corporate restructuring. It announced the establishment of KuGroup, which “consists of three business groups, namely KuCoin Global, KuCloud and the KuChain & KCS Business Group.” KuCoin’s March 17 announcement came just six days before the U.S.-based law firm Schall announced its investigation into KuCoin and another exchange accused of “false and misleading statements to account holders” in a pending class action. The exchange is also the subject of a separate class action filed by Chase Williams in the United States District Court for the Southern District of New York regarding the selling of unregistered securities.^[5]

Singapore Court Restrictions

In April 2020, CoinTelegraph reported that KuCoin.com, the primary web domain of KuCoin exchange, was locked since the end of March by order of the High Court of Singapore. The court issued a temporary injunction on March 24 barring KuCoin from moving its assets, including its website, from the country. A March 30 email from domain registrar GoDaddy provided to Cointelegraph showed that GoDaddy was complying with the court order.^[4]

‘Empty Office' Rumor

In August 2018, the Medium user known as Jackson Wong discovered that the crypto exchange KuCoin has an empty office in Hong Kong. KuCoin responded to an "empty office" claim, asserting that its operational headquarters were in fact in Singapore. The company’s response stated:

“In fact, KuCoin’s public address in Hong Kong is merely a mailing address of one of KuCoin’s many subsidiary companies. KuCoin Headquarters is in Singapore. KuCoin has always been a global firm, with over 300 employees and four major offices in China, the Philippines, Singapore, and Thailand.”

The exchange’s current geographic situation is less clear. On its website, the company profile states it “operates in Seychelles,” a jurisdiction not mentioned in its 2018 blog post. Unlike Binance, Coinbase and Ripple, KuCoin did not file with the Monetary Authority of Singapore to request a deferral of the requirement to operate without a payments license. Without a license or a deferral, KuCoin cannot legally operate in Singapore.^[3]

KuCoin Labs

On April 15, 2021, KuCoin announced the official launch of KuCoin Labs, an incubator and research arm in the KuCoin ecosystem. As the first step, KuCoin Labs also established a 50 million fund to empower the development of early-stage crypto projects. The predecessor of KuCoin Labs was the investment and incubation team, which was established by KuCoin in May 2018. KuCoin Labs now possesses a portfolio of over 50 projects including Arweave (AR), MultiVAC (MTV), CertiK (CTK), OneLedger, LUKSO (LYXe), and Ankr (ANKR), in sectors such as infrastructure, DeFi, and NFT.

Besides investments in building projects directly at an early stage, KuCoin Labs will further empower the development of high-quality blockchain projects through marketing and PR support, business partnership support, secondary market fast-track, blockchain technical support, legal advice, business planning, token economy design, and more.

Hacking Incident

On September 26, 2020, the KuCoin exchange team said in a statement that it detected large withdrawals of Bitcoin and Ethereum and ERC20 Tokens to an unknown wallet beginning at 19:05 UTC time on Friday (Sept 25, 2020). In a live stream Chief Executive Officer, Johnny Lyu said that one or more hackers obtained the private keys to the exchange’s hot wallets. Kucoin transferred what was left in them to new hot wallets, abandoned the old ones, and froze customer deposits and withdrawals. He also claimed that KuCoin’s cold wallets were unaffected. He did not disclose the number of cryptocurrency assets that were stolen but said that KuCoin would release the hacker’s wallet address and a list of stolen funds. This is what he said additionally in the statement.

“We are in contact with many major crypto exchanges such as Huobi, Binance, OKEx, BitMax and Bybit, as well as blockchain projects, security agencies, and law enforcement to work on this. Some effective measures have been taken, and we will update with more details soon.”

Reports on the various portals estimate the breach to have affected $150 million USD in user funds.   Later on the same day, Kucoin team released information and suspicious addresses involved in hacking activity. It confirms that the damage is worse than initially thought. The suspicious addresses show that damage is closer to $200 million so far. Major cryptocurrencies withdrawn by a hacker are listed below. Some of the other tokens are also affected, including Velo, VIDT, SNTR, Presearch. According to the update, Tether company frozen the assets of the 20,000,000 USDT withdrawn from KuCoin and helping Kucoin to recover funds.^[2]

On September 28, 2020, CEO Johnny Lyu announced that Kucoin team worked with Tether (USDT), Orion Protocol, KAI Chain, NOIA Network, VELO, VIDT Datalink, #Silent Notary, Covesting (COV), Opacity (OPQ) & Ampleforth to resolve the incident, and the affected tokens of these projects are safe or in a position to be recovered now.

Commenting on the hack, Charlie Cai, the media manager at KuCoin, told CoinTelegraph that a total of 130 million of the stolen digital tokens had already been secured or in the process of being recovered by the KuCoin security team. In this regard, Cai further stated that Tether (USDT) had successfully frozen a total of 22 million USDT stablecoins that were compromised while Velo Labs, too, announced that it will redeploy and replace each of the VELO tokens that were transferred as part of the heist. He added: “The 122 million VELO tokens (about $75.7 million) that were affected will be invalidated.”

According to data from crypto transaction tracking service Whale Alert, on September 28, KuCoin hackers kept sending thousands of dollars worth of Synthetix Network Token (SNX) to Uniswap, the largest DeFi (Decentralized Finance) protocol by total value locked. Alongside using Uniswap to send stolen SNX tokens, KuCoin hackers also moved $5 million in ChainLink (LINK) and SNX to unknown wallets, according to Whale Alert data. A spokesperson at Whale Alert elaborated to CoinTelegraph that at least $4.2 million out of this amount was actually converted into Ether (ETH) using Uniswap and Kyber Network. Analysts at Whale Alert were able to identify at least three ETH addresses containing dirty ETH coming from the KuCoin hack.^[1]

On September 27, artificial intelligence and data service Ocean Protocol announced that it had migrated from its old token address to a new one to thwart the KuCoin hacker’s attempts to offload 21 million OCEAN tokens worth some $8.6 million. According to a Sept. 27 blog post from the Ocean Protocol team:

“At 1600 GMT, a new contract was instantiated reflecting the balances of OCEAN as of block height 10943665 on the Ethereum mainnet. The new smart contract will allocate stolen token balances to an address which will be held in trust in Singapore for persons affected by the theft.”

On October 3, 2020, Kucoin exchange CEO Johnny Lyu updated the public in regard to the security incident.

“A quick update since my last live stream on Sep 30. After a thorough investigation, we have found the suspects of the Kucoin Security Incident with substantial proof at hand. Law enforcement officials and police are officially involved to take action. With great support from our partners in the industry, another $64 million in assets are now out of the control of the suspicious addresses, bringing the total value to $204 million since Oct 1.”

The Kucoin CEO added:

"Kucoin is coming back to full functionality. My team and I will continue to do our best to offset the impact of the incident. As of now, a total of 31 tokens have opened [for] deposits [and] withdrawal services, and more tokens including BTC, ETH, and USDT will follow."