HEX

What is HEX (HEX)?

HEX is the first high-yield blockchain-based Certificate of Deposit (CD). A CD, also known as a “Time Deposit,” is a financial instrument that gives money a time value. Users deposit their funds into a CD for a specific amount of time and, as long as they don’t try to withdraw early, get their money back plus interest.

The stark contrast between yields offered by HEX and those offered by banks was enough to immediately put HEX in the limelight. Its innovative airdrop at launch did the rest, with Bitcoin holders at the time being able to claim 10,000 HEX per BTC.

However, HEX has a polarizing reputation in the cryptocurrency industry. Opinions over it are divided, possibly even more than over any other project out there. Allegations abound, and HEX’s own website has an extremely long, dedicated page answering the question, “Is HEX a scam?”

When Was HEX Launched?

The low-interest rates on CDs offered by banks were one of the reasons HEX came to be. The cryptocurrency industry has spent the vast majority of its time developing during times of low or zero interest.

These low or near-zero interest rates being offered by banks mean that investors often chase yields. This explains the rapid boom of DeFi at the turn of the decade, when even US dollar stablecoin platforms started offering double-digit returns.

However, HEX predates the DeFi boom. Launching in late 2019, it made a real splash with its claims of massive returns on the CD model. While banks were offering in the region of 2% for a CD at the time, HEX went way above and beyond.

It was launched over a one-year period, during which Bitcoin holders were able to claim HEX for free. On the last day of this period, all unclaimed HEX were distributed to HEX stakers. This was called BigPayDay.

While interest rates are rising as 2022 stutters to an end, HEX still massively outperforms traditional finance (TradFi). HEX’s website claims that the average stake on its platform earns a massive 38% APY.

Who are the Founders of HEX?

HEX was founded by Richard Heart, born Richard James Schueler. His past aliases include James Hart, J. Richard, Richard Schueler, and J. Hart.

It is often thought that the purpose of Heart’s current alias is to distance him from a somewhat checkered past. It has been reported that he was investigated by Panamanian authorities in the mid-2000s for theft and extortion.

He also apparently volunteered for the Methuselah Foundation, which is supposedly “extending the human lifespan, making 90 the new 50.”

In his early career, Heart was even sued by Peacefire.org for violating Washington State’s anti-spam laws. And yet, his personal website claims that he is a “force for good in this world.” This is immediately followed by boasts about his wealth, including a $10 million watch collection and the “quickest Ferrari ever made.”

Despite all of these claims, which Heart tends to be quite happy to back up, he has never admitted how many HEX tokens he personally owns. Most analysts estimate that he owns 50% or more of the total HEX supply, but this has never been substantiated.

On BigPayDay, HEX stakers were looking forward to a massive windfall of about 3x their principal because only 18% of the HEX supply was staked. Right before the BigPayDay payout, the amount of HEX staked shot up to 98%.

It has been alleged that Heart exploited the mechanisms of the HEX smart contracts. Former colleague Tone Vays accused him of dumping depositors’ Ethereum to mint more HEX for himself.

How Does HEX Work?

HEX is often called a Ponzi scheme by its detractors. This sort of model, named after innovative grifter Charles Ponzi, relies on an influx of new investors whose funds will be used to pay older investors their promised returns.

A Ponzi scheme can be sustained as long as few investors demand full repayment. Another hallmark is that Ponzi schemers also mislead investors about the source of their gains.

According to HEX, the massive yield they generate for their depositors comes purely from inflation. This inflation rate is relatively low, currently 3.69%. HEX explains away the discrepancy between this low inflation and the average 38% yield with the claim that only 10% of the HEX supply is staked.

Those who stake HEX tokens also receive half the penalty incurred by other stakers. Penalties are incurred when stakers either unlock their tokens early or fail to unlock them within their two-week timeframe to do so. The other half goes to the origin address, widely suspected to be controlled by Richard Heart.

Furthermore, the HEX protocol requires users to actively mint their own rewards at the end of their staking period. This means that the HEX inflation can also be delayed since many stakes last up to 15 years.

What Makes HEX Unique?

There is nothing unique about Hex save, perhaps, for its controversial founder and extremely aggressive marketing policies.

Technologically, Hex does absolutely nothing at all. It is simply an inflationary ERC-20 fungible token on the Ethereum blockchain with a set inflation rate. Its sole purpose is the enrichment of stakers, although many would argue that it exists primarily to fund Heart’s infamous shopping sprees.

HEX claims that it is an improvement on Bitcoin. This message is trumpeted across its website and has been parroted by Heart on many occasions.

However, Bitcoin was created to be a digital payment network and solve the digital currency double-spending problem. It was meant to remove intermediaries from global payments and be a protest against fractional reserve banking.

On the other hand, HEX just creates more of itself and gives that to people who are willing to risk locking up their funds with an unregulated protocol for a period of time.

How is the HEX Network Secured?

HEX is secured by Ethereum since its token is an ERC-20. This might be one of the best things about it, as Ethereum is one of the most secure and decentralized networks out there.

Ethereum is secured by a proof-of-stake (PoS) consensus mechanism, having moved away from proof-of-work (PoW) in September 2022. PoS uses an economic system of incentives to ensure that network nodes behave according to the protocol.

To become a validator, node operators have to deposit a minimum of 32 ETH in the protocol. If they maintain uptime and validate transactions as defined by the protocol, they get a share of block rewards proportional to their stake. This helps them earn more ETH, but if they misbehave, they can lose their stake in a penalty called “slashing.”

According to HEX, the CD uses a system called “proof-of-wait.” This is simply a spin on the fact that HEX stakers have to lock their tokens up for a certain amount of time. Theoretically, this has the effect of removing these tokens from circulation and supporting the HEX price.

What is the Use of HEX?

The HEX cryptocurrency exists purely to enrich holders who decide to lock it away into smart contracts resembling time deposits.

Who Controls HEX?

HEX is controlled by Richard Heart. While the platform is extremely heavy on marketing materials, it is particularly light on transparency. There’s very little information to do with compliance or even the team behind Heart and his project.

This usually leads to assumptions about Heart’s control over the HEX wallets being significant. In fact, a Protos article on HEX in July 2022 concluded that if Heart was to control the origin and Flush HEX addresses, he could control over 88% of HEX’s total supply.

How Much HEX is In Circulation?

HEX has a total circulating supply of 582 billion HEX, which inflates at 3.69%. According to the hex.com website, 63 billion HEX tokens are staked. This isn’t far from 10%, and it’s the platform’s rationale for APY yields for stakers being as high as they are.

Cryptocurrencies often get criticized for being created out of thin air and being based on nothing of value. This isn’t true in most cases, given that there’s usually a legitimate reason for most cryptos’ value.

In the case of HEX, though, this inflation isn’t to do with rewarding miners for propagating the network or anything of the like. The protocol simply creates more tokens and gives them to stakers, fulfilling the promise of a high yield.

How Do You Buy HEX?

Primarily, you can buy HEX using decentralized exchanges on the Ethereum blockchain. Most of HEX’s daily trading volume is seen on Uniswap, with version 3 of the DEX providing the lion’s share. The most common way to buy HEX on Uniswap V2 or V3 is with the USDC stablecoin.

HEX has very limited listings when it comes to centralized exchange platforms. BKEX, Bitget, Poloniex, and BitMart are the main CEXs dealing in HEX.

It is notable that HEX is a very thinly traded token in comparison to its sizable “market cap.” It tends to average a few million USD in daily trading volume, especially at its lows. Most other cryptocurrencies with similar market caps tend to see trading volumes in the billions.

The natural argument is that HEX is designed to be staked and therefore locked away, but HEX’s own data contradicts this thesis, with only a little over 10% staked.

Is It Possible to Buy HEX Instantly?

It is possible to buy HEX instantly on a limited number of CEX platforms, but you might have to wait a little bit on a DEX.

HEX is an ERC-20 token on the Ethereum blockchain, so trading for it using a DEX is done on-chain. That means the network congestion on the blockchain at the time may play a role in how long your transaction takes, as well as what sort of gas fees you have to pay.

How Do You Store HEX?

Since HEX is predominantly traded on decentralized exchanges, most holders tend to use non-custodial wallets. Metamask is one of the most popular Ethereum-compatible wallets for ERC-20 tokens like HEX.

Since the main (or only) purpose of HEX is staking to earn a yield, hot wallets like Metamask tend to be the go-to option for most users. These wallets allow you to connect very easily to the HEX staking platform, requiring just a couple of clicks.

Hex Energy Consumption

As it’s an ERC-20 token on Ethereum, it isn’t very reasonable to say that HEX consumes any meaningful amount of electricity. In fact, given its very low trading volume compared to other cryptocurrencies, the energy footprint of HEX is tantamount to negligible.

Is HEX a Good Investment?

Most cryptocurrencies have a purpose. Bitcoin provides an alternative cash system as well as a store of value thanks to its network effect, and Ethereum hosts and fuels a titanic ecosystem of other protocols, including Hex itself. Many cryptocurrencies also have use cases, some broader or more powerful than others.

HEX has one use case. You can buy it to stake it and recoup your investment in HEX plus an additional sum of HEX later. Whether this HEX that you get more of has value or not is for you and others like you to decide.