HEX Crypto: Everything to Know
By Beluga Research October 7, 2023
- HEX is an ERC-20 token that advertises itself as a Certificate of Deposit, but it is believed to be a scam because the value of the token has dropped appreciably
- As of July 2023, HEX and its founder, Richard Heart, are the subject of an active investigation by the U.S. Securities and Exchange Commission (SEC)
- In late September 2023, HEX advertised offered stakes with a 40% average percentage yield (APY)
- Since HEX was launched in December 2019, it has experienced several serious price drops
HEX is an ERC-20 token that advertises itself as a Certificate of Deposit, but it is believed to be a scam because the value of the token has dropped appreciably. HEX is sold through executions of smart contracts on the Ethereum blockchain. It relies on a proof-of-stake (PoS) consensus mechanism rather than a proof-of-work (PoW) consensus mechanism.
The practice of staking involves locking a set amount of tokens for a predetermined period. The primary concern regarding HEX is that when HEX tokens lose value, the price of HEX will drop. This means investors who have staked coins will not see a return on their investment. Further, HEX must issue more tokens to compensate CD holders. Minting more HEX tokens for this purpose will further lower the price of HEX.
A Brief History
Richard Heart, born Richard Scheuler, has a history of engaging in scams. He launched HEX in December 2019, using aggressive and unconventional marketing tactics. For example, Heart advertised HEX on billboards, magazines and in TV ads. Heart is also the founder of PulseChain and PulseX. Heart originally planned to launch HEX as "Bitcoin HEX" but then rebranded it as simply "HEX." This was due to regulatory concerns and the negative reputation surrounding Initial Coin Offerings (ICOs).
At first, the cryptocurrency community was excited about HEX. Investors were skeptical that it would be a viable concept. Some members of the community praised its innovative staking mechanism and potential for significant returns. Others questioned its legitimacy and Heart's motives.
In July 2023, the SEC charged Heart, HEX, PulseChain and PulseX with conducting unregistered offerings of crypto asset securities that raised over $1 billion in crypto assets from investors. One of the events of concern was Heart and HEX's sale of HEX tokens between December 2019 and November 2020. This sale allowed Heart and HEX to collect over 2.3 million Ethereum (ETH), partly through "recycling" transactions that allowed Heart to secretly gain control of more HEX tokens. As of late September 2023, HEX is not listed on the largest cryptocurrency exchanges.
HEX Crypto: Everything to Know
- Tokenomics: HEX operates on a deflationary model. The supply of the token is supposed to decrease over time. Staking and the "big payday" contribute to this reduction. Stakers earn additional HEX tokens. The payday is a one-time event in which a large amount of tokens will be distributed to stakers.
- Staking Rewards: HEX offers generous rewards to users who stake their tokens. Longer staking periods yield higher potential returns. This feature encourages long-term holding and discourages short-term speculation. Stakers can earn substantial bonuses, especially with extended participation.
- Time-Locked Stakes: HEX introduces time-locked stakes, meaning tokens cannot be accessed until the lock-up period ends. This feature reduces impulsive selling.
- Adoption and Community: HEX had a dedicated community of supporters who actively promoted and discussed its development. That community has grown smaller as more information about Heart and investigations of his involvement with crypto assets have become public.
- Watch the current SEC investigation to determine where this cryptocurrency is headed. The SEC alleges that Heart used investor funds from PulseChain and PulseX to buy a number of luxury goods. Further, it considers HEX, PulseChain and PulseX unregistered securities which should have been registered. The SEC alleges the sale of HEX violated U.S. federal securities laws.
- Acquire HEX tokens from exchanges that list it. An investor can store HEX in a secure wallet that supports ERC-20 tokens. Popular options include hardware wallets like Trezor or Ledger and software wallets like MetaMask.
- Stake tokens to earn rewards. Staking involves locking up tokens for a predetermined period during which the investor is eligible to receive interest. HEX rewards investors who lock up tokens for longer rather than shorter periods. Investors cannot withdraw tokens until the stake period ends. The concern is that the tokens may not be worth even their initial price when the staking period ends.
- Focus on generating interest for token holders. HEX employs a mechanism called "Interest Over Time." This mechanism rewards stakers with additional HEX tokens. The longer an investor stakes, the more interest they can earn.
- "Share Rate" system. An investor who stakes HEX tokens receives shares that represent their portion of the staking pool. The number of shares they receive depends on the size and duration of their stake. The Share Rate increases over time. It favors early stakers with more shares compared to those who stake later. This incentivizes early adoption and benefits long-term stakeholders.
- Unique distribution system. HEX's launch phase involved users claiming HEX tokens for free based on their bitcoin holdings. Then the platform fixed the supply of HEX. The fixed supply, combined with the staking mechanics, created scarcity. Theoretically, this should have driven up the value of the tokens over time.
- High-interest staking: HEX allows users to stake their tokens and earn interest. Staking involves locking up cryptocurrency to support the network and offers attractive rewards for passive income.
- Longer-term stakes yield higher returns: The project incentivizes users to stake HEX tokens for longer periods by offering higher interest rates. This encourages long-term commitment and stability for HEX.
- Built-in referral program: HEX has a referral program that rewards users for bringing in new participants. By referring others, individuals can earn additional HEX tokens as a percentage of their referrals' stakes. This promotes network growth.
- Price appreciation potential: HEX's unique staking mechanism encourages participants to hold onto their tokens. This should drive up demand and value over time. Yet cryptocurrency markets are volatile. Price appreciation is never guaranteed.
- Auditability: HEX operates on the transparent Ethereum blockchain. All HEX transactions and stake-related activities can be verified.
- Controversial launch and distribution : The founder of HEX is currently under a significant government investigation. HEX's controversies have led to debates that negatively affect the perception, and therefore, the worth, of the coin.
- Complexity and learning curve: HEX's staking mechanism and overall design are complex. Critics have claimed the coin is designed to defraud investors. The intricacy regarding the staking mechanism makes HEX difficult for newcomers to access and understand. Calculating potential deters investors who seek simpler investment options.
- Reliance on Ethereum network: HEX's performance and scalability depend on the Ethereum network. During high network congestion, transaction fees become prohibitively high for some users.
- Regulatory uncertainties: Cryptocurrency regulations are uncertain in many countries. They introduce risks for investors and negatively impact the long-term viability of HEX.
- Market volatility: Cryptocurrencies, including HEX, are prone to significant price volatility. The value of HEX tokens can fluctuate dramatically in short periods. This can lead to significant gains or losses within a short period.